Friday, November 21, 2014

Lost & Found: Another Insurer Settles, Illinois Auction, UP in the Mainstream

A brief roundup of some recent unclaimed property related news:

More Insurance Industry Settlements -- According to an article on Insurance News, another life insurer -- Sun Life of Canada -- has settled claims relating to the alleged "asymmetrical" use of the Social Security "Death Master File."  Generally, the states allege that insurers actively researched death index information for annuity products (i.e., where the insurer was paying benefits until the policyholder died) but didn't use the same information to determine when death benefits became payable to beneficiaries.  According to the article, this represents the 18th settlement arising the from the multi-state investigation of life insurers' unclaimed property practices.

Illinois Unclaimed Property Auction -- Looking to do some early holiday shopping?  The Office of the Illinois State Treasurer will be commencing an auction of unclaimed property on Monday.  The Northwest Herald has the details.

Unclaimed Property in the New York Times -- For those of us in unclaimed property -- a relatively niche practice, to say the least -- it's always a little exciting when UP news makes it to mass media.  (If for no other reason than to prove to our disbelieving family members that such laws exist).  The The New York Times recently had a "Your Money" article by Ron Lieber featuring unclaimed property.  

Wednesday, November 19, 2014

5Ws: The Proposed Revision to the Uniform Unclaimed Property Act -- A Primer for the Well-Adjusted

Earlier this year, to some fanfare in the unclaimed property industry, the Uniform Law Commission ("ULC") embarked on a quest to revise the Uniform Unclaimed Property Act.  As a glance at the ULC page on the revision makes clear, comments on this endeavor have been made by advocacy groups, holders, industry associations, audit firms, regulators, and locator firms.  There have also been reams of paper spilled on speculation as to what the ULC may or may not do, opinion on what the ULC should or should not do, and commentary on what the ULC's revisions should or should not be.
We may comment on specific proposals relating to the ULC in due course.  That said, it has come to our attention that (sadly) many people do not follow uniform act revision processes closely as a general matter.  They do not understand the rhythm of the law-drafting process, the delicate beauty of the waltz between legislator and lobbyist, the sweeping grace of the intellectual seed of policy being planted in the fertile soil of the . . . .

Where were we?  For those of you generally aware of all the activity surrounding the uniform unclaimed property act revision, but nevertheless leading well-adjusted lives and with basic questions regarding the process (Where is the State of Uniform, anyway?  Probably near Idaho.) we present the following primer in the form of the "5Ws."

Who?  The Uniform Law Commission, also known as the National Conference of Commissioners on Uniform State Laws.

Umm....great.  But who are those people?  The Uniform Law Commission is a group of lawyers, appointed by state governments, "to research, draft and promote enactment of uniform state laws in areas of state law where uniformity is desirable and practical."  Note that the Uniform Law Commission is in no way specific to unclaimed property.  According to the ULC's website, the organization has promulgated over 300 uniform acts since its founding in 1892.  These folks have brought you such famous hits as the Uniform Commercial Code ("UCC"), the Uniform LLC Act, and the Uniform Probate Code.  Inasmuch as the Unclaimed Property Act deals with the disposition of property arising out of often multistate transactions, and given that a specific item can generally only be escheated to one place (despite efforts to the contrary by unclaimed property auditors) unclaimed property law is clearly one of those topics where "uniformity is desirable and practical."

What?  Revising the Uniform Unclaimed Property Act of 1995.  (Seriously, if you got this far in the post and didn't know that yet . . . .)   

Where?  In most places.  Or nowhere.  Depends on how you look at it.  As noted above, there is no State of Uniform.  So, who cares what the laws are in that (fictional) jurisdiction?  A lot of people, it turns out.  While the legislation drafted by the ULC is not, itself, "law" anywhere, and is not enforceable by any court or regulator -- ULC-drafted legislation is often used as a model by states in drafting their own laws.  For example, while the Uniform Unclaimed Property Act of 1995 (the most recent unclaimed property legislation finalized by the ULC) is not itself enforceable, a version of that Uniform Act is in place in dozens of states.  The takeaways here are (1) the uniform acts are used by states as models for their own legislation, but (2) the uniform act itself is not enforceable anywhere.

When?  Hard to say, but it will take a while.  The ULC has not drafted proposed language for a new uniform act, but has solicited comments from interested parties.  The next meeting of the ULC is scheduled for February.  Some time after that, proposed legislation will be drafted, commented upon, and potentially amended.  Once that happens, the uniform law may be finalized.  As noted above, however, even the promulgation of a new uniform act by the ULC does not make that act enforceable.  The promulgation of a uniform act is thus not the end.  Instead, to paraphrase Churchill, it is just "the end of the beginning."  The model legislation still must be introduced, sent to committee, debated, voted upon and signed by the governor just like any other legislation.

Why?  Quite simply, the world has changed quite a bit since the last model act was issued (you know, in the last millennium).  In 1995:
  • The is what the internet looked like;
  • The countries of Montenegro, Kosovo, East Timor, and South Sudan did not exist;
  •  The New York Times never had a color photograph on the first page;
  • Google did not exist;
More saliently, 1995 was before the ubiquity of the gift card, before electronic payments, before on-line logins to financial accounts, etc.  The potential revisions to the act will no doubt address many of these developments.  They might also have a thing or two to say about the conduct of unclaimed property audits, the availability of interest paid on unclaimed property held by the state, and number of topics that have arisen in the last 20+ years.


Thursday, October 30, 2014

'Twas the Night Before Fall Reporting

‘Twas the night before Fall Reporting, and all through the firm,
Everyone in unclaimed property was starting to squirm.
Wire transfer instructions were given to disbursements with care,
In the hope that remittance confirmations soon would be there.
In state capitals, Treasurers smiled at the incoming proffers,
Knowing that millions would soon be in the states’ coffers.
Bob was in payables, and me with the CFO,
Was it all out?  Both of us wanted to know.
When down from the Controller there arose such a wailing,
I assumed there must be a late response to a due diligence mailing.
Away to accounting we ran down the hall,
Where Bob and I nearly tripped over the accumulated sprawl.
UP-1s, NAUPA codes, and Holder Reporting Guides,
Covered every flat surface with big stacks besides.
When, what led my stomach to churn and contort,
But hundreds of names that were left off the report.
When I asked how this many names could’ve been missed,
I was told they were still working off last quarter’s list.
Quickly, Bob and I each stifled a cry,
Certainly an exemption or two must here apply.
Airline miles? Lottery winnings? Stale B2B credits?
Perhaps just small balances with offsetting debits?
Alas, no, we would be late, and it might be gory,
With penalties and interest (both statutory).
There just wasn’t enough time to report all the names
Relationship codes, amounts less “lawful claims.”
We needed an answer, and the clock was still ticking,
Through each statute and reg, we just kept on clicking.
Then I noticed on the ledger I continued to assess,
All of the amounts listed were $50 or less.
My mood picked right up, and I started to sing:
We’ll just add it all up and report the whole thing!
Aggregate reporting -- that was the way!
We’d still get this report out by the end of the day!
We quickly revised, and added, and listed,
Everyone in tax helped, even legal assisted.
When it was ready, we unleashed the whole thing,
Breathing a sigh of relief (at least 'til next spring).
And I said to Bob, as the remittance flew out of sight,
Happy fall reporting to all, and to all a good night!

Monday, October 6, 2014

Say "Aloha" to Your Unclaimed Property

Modern day unclaimed property laws are "custodial" in nature, meaning that the state takes possession of, but not legal title to, property that is reported and remitted to the state.  As a consequence, it is the rule in most states that although unclaimed money and assets may be remitted to the state's general fund and used for state spending, the owner never loses the right to reclaim his or her property.  This is in contrast the the historical practice of bona vacantia in England and prior Roman civil law, where "ownerless goods" would be owned by the crown.

In fact, it is the custodial nature of these laws and the unlimited opportunity for the owner to reclaim his or her money that serve as the states' most prominent response to frequent holder complaints that state unclaimed property laws are increasingly unfair, complex or burdensome.  Some states, however, are quietly limiting owners' rights to make claims for property held by the state. 

For example, pursuant to Hawaii Senate Bill 2321, effective July 1 of this year, an owner has 10 years to file a claim for property valued at $100 or less.  After that time, according to the new law, the property "shall escheat to the state" permanently.  According to testimony by the Director of the Department of Budget and Finance (who, to his credit, testified against this legislation) the new law means that there are 275,000 items (in an aggregate value in excess of $20 million) that are now subject to escheating permanently to the state.

Similarly, in Idaho, the amendment to Section 14-518 of the Act means that items valued at less than $100 need not be listed on the state's website database of unclaimed property held by the state.  While this represents a small fraction of unclaimed property held by the states as a whole, as states become more addicted to unclaimed property as a revenue raising measure, such initiatives will probably increase (to the detriment of owners).




Monday, September 22, 2014

California Amends Definition of “Owner” to Give Charities Greater Access to Unclaimed Funds

On September 15, California Assembly Bill 1712 became law.

This legislation expands the definition of an "owner" under the Act authorized to make a claim for unclaimed property in the Controller's possession.  In particular, the definition of "owner" was amended to add "a nonprofit civic, charitable, or educational organization that granted a charter, sponsorship, or approval for the existence of the organization that had the legal right to the property prior to its escheat but that has dissolved or is no longer in existence, if the charter, sponsorship, approval, organization bylaws, or other governing documents provide that unclaimed or surplus property shall be conveyed to the granting organization upon dissolution or cessation to exist as a distinct legal entity." 

In other words, if the California Controller's office is holding unclaimed property for the American [Charity] Association - LA Chapter, and that entity is dissolved or no longer exists, the property can be claimed by the nationwide American [Charity] Association.
According to a report on the bill by the Assembly Judiciary Committee, the bill arose from the acknowledgment that "there is a large amount of unclaimed property  . . . that is owned by nonprofit chapters or affiliates that have dissolved."  By amending the definition of owner to include the parent or sponsoring entity of the dissolved organization, the bill's sponsors intend to "retrun [the funds] to the charitable sector where it can once again benefit the community."

While the legislation is certainly laudable, insofar as it requires that the organizational documents of the dissolved entity to provide that unclaimed property will pass to the parent entity, it is unclear what impact it will have on the millions of dollars already in the Controller's possession.