Tuesday, April 17, 2012

An Introduction to Unclaimed Property - Part I (Who)

Welcome to a new feature that we will roll out over the next few weeks on this blog:  An Introduction to Unclaimed Property.  For regular unclaimed property professionals, this is just a refresher.  Really, these posts are intended for you if you are:
  • An accounting or finance professional who has just been told that you will be responsible for unclaimed property compliance;
  • An in-house counsel who is dealing with a legal/compliance issue relating to your company's unclaimed property responsibilities;
  • The unlucky recipient of an audit notice from a state or private third-party auditing firm;
  • A reporter looking for an unclaimed property primer; or
  • Someone simply interested in learning more about unclaimed property (in which case, we'd suggest you get a hobby).
As a general rule, "unclaimed property law" refers to a statutory regime in every state (plus the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and a number of foreign jurisdictions) whereby certain dormant intangible property owned by an owner, but held by a holder, is reported and remitted to the government for safekeeping.  The government, in turn, indemnifies the holder from further claims by the owner, and holds the property (generally, forever) until such time as it is claimed by the rightful owner.  From the holder's perspective, there are generally five steps of compliance:
  1.   Determine what state's law applies to a particular owner's property.
  2.   Determine what the appropriate dormancy period for the item in question.
  3.   Try to contact the owner, to let them know that the property is in danger of going to the state.
  4.   Fill out an unclaimed property report for the applicable state.
  5.   Remit (e.g., turn over) the property to the applicable state.
While the foregoing covers the essence of what one needs to know about unclaimed property laws, this set of articles will expand on these issues in a little more detail.  

As with any good story, we want to start by covering the Who, What, Where, When, and Why of unclaimed property law, regulation, and compliance.  Please be advised, that as with all articles on this blog, this is not intended to be legal advice.  You can (and should) consult with the unclaimed property lawyer of your choice with any questions about your particular situation.  Let's start with the "Who" -- Who has an obligation to report unclaimed property?  Who is a "holder"? 

While the specific definitions and scope of state unclaimed property laws vary from state to state, nearly every unclaimed property law regime applies to a wide variety of companies, banks, brokers, joint ventures, sole proprietorships, etc.  For example, under the Ohio Act, a "holder" is "any person that has possession, custody, or control of moneys, rights to moneys, or other intangible property, or that is indebted to another."  Notably, such broad definitions of holder would seem to encompass almost everyone and anyone.  So, generally, if your company or business is holding property for another (and no state-specific exemption applies), you're a holder.

Similarly, who is an "owner"?  Basically, anyone to whom money or property is owed.  For example, as California law explains, "owner" means "a depositor in the case of a deposit, a beneficiary in case of a trust, or creditor, claimant, or payee in case of other choses in action, or any person having a legal or equitable interest in property subject to this chapter, or his or her legal representative."

In the next installment - tentatively scheduled for next week - we'll cover the "What" of unclaimed property:  What gets reported under the laws?  Checks, abandoned warehouses, stocks, old issues of Sports Illustrated, foreclosed properties, gold teeth?  (Preview:  yes, probably not, definitely, depends on where you find them, probably not, and maybe).  

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