Part Three: The Unclaimed Property Law

The vast majority of the property that escheats to the State of California does so subject to the Unclaimed Property Law. This law is a modern statute which lays out detailed rules governing how and when various types of property escheat to the State, how the property is to be managed while in the State Controller’s custody, and the methods for returning unclaimed property to its rightful owner. The key concept is that property that escheats to the State under this law does not permanently belong to the State – it can always be reclaimed by a person who can establish the right to ownership. However, this law does not apply to property that escheats to the State as part of a probate proceeding, and as such, it does not apply to real property.
 
What does the State Controller do with the unclaimed property in the State’s custody?
When the property is money, it is deposited into an account which is held on behalf of the owner. Property other than money – typically this will be securities, other financial instruments, or personal property not rejected by the Controller – is held by the Controller for around 18 months to two years after it has escheated to the State. Any income generated during this holding period is credited to the owner’s account. Once the holding period is finished, the Controller will sell off the property, with the net proceeds of the sale being retained on the owner’s account. If the Controller determines that the probable cost of the sale exceeds the value of the property, the Controller can decide not to liquidate the property.
 
Does the State pay interest on unclaimed property?
No. Other than the income generated by property other than cash prior to liquidation by the Controller, no interest is paid on unclaimed property. This means that, even if the State holds a large sum of cash for many years, no interest will be paid to the owner if it is ever claimed. For this reason, if the property is an asset that tends to appreciate over time, its owner will lose the opportunity to benefit from that growth once the asset has been converted to cash. This is perhaps the most important reason why a person who is the rightful owner of some unclaimed property should claim it as soon as possible.
 
Can claiming property result in a capital gain?
Yes. If property other than cash appreciates during the period while it is being held by the Controller, the owner will have a capital gain if the net sale price when the Controller liquidates the property is higher than the owner’s tax basis in the property.
 
What is the time limit for bringing a claim?
Because there is no permanent escheat under the Unclaimed Property Law, there is no specific time limit for bringing a claim. However, if the property is an asset other than cash which has been sold or discarded prior to the initiation of the owner’s claim, the owner may only be able to get the proceeds of the sale, or nothing, depending on the situation.
 
Can I claim real estate?
Real estate is not subject to the Unclaimed Property Law, so there is no way to claim real estate under it. If real estate has escheated to the State under another statute (such as in a probate proceeding), claims to reobtain it must be handled through a different statutory scheme. Because those claims can be complicated, most claimants should seek assistance from a competent attorney.
 
When can the State Controller destroy or discard unclaimed property?
If the State Controller determines that property which has escheated to the State under the Unclaimed Property Law has no commercial value, the property is only required to be retained for a period of seven years. Following that, the property may be destroyed or discarded at any time. Once the property has been disposed of, the rightful owner is no longer allowed to make a claim to recover it, and since the property had no commercial value, the owner cannot recover any sale proceeds either. Alternatively, if the Controller determines that it would not be in the interest of the State to take custody of a piece of tangible personal property which would otherwise have escheated to the State, the Controller has the authority to reject the property and prevent it from escheating in the first place.

If you are interested in learning more about how to protect your property, contact us today to schedule a consultation.
 
Copyright © Stone, Doyle & Heffel 2026.
 
This article is intended for informational purposes only and not for the purpose of giving legal advice for a specific person or situation. Nothing in this article should be taken as legal advice, and reading it does not create an attorney-client relationship.

Part Two: Common Escheat Situations

There are many possible situations in which the law provides for property to escheat to the State, but the basic principle common to all is that property goes to the State either when its rightful owner cannot be identified or when the party holding the property has been unable to contact the owner over an extended period. This post will introduce several of the more common situations in which property escheats to the State under California law.

When do assets escheat to the State under California’s Unclaimed Property Law?
In the vast majority of cases, assets escheat to the State when the party holding the property reports it to the State Controller as escheated under California’s Unclaimed Property Law. The rules governing when, whether, and how different types of property escheat to the State depend on factors including the type of property, how it is held, and the party who is holding it.

Since real estate ownership is usually based on who holds a deed to a piece of property, rather than who is in physical possession, real estate is not a type of property that can be “held” on behalf of its rightful owner within the meaning of California’s Unclaimed Property Law. For that reason, real property does not escheat to the State merely because its owner cannot be contacted. (Of course, if the owner is totally absent and property taxes are not paid, the government could foreclose on the property to satisfy a tax lien, but foreclosure is different from escheatment.) However, even though real property is excluded from the Unclaimed Property Law, there are still situations in which it can escheat to the State, as discussed below.

What are the general notice requirements for escheat?
When some piece of property is at risk of escheat, the holder of the property has a statutory duty to attempt to notify its owner. The exact timing requirements vary depending on the type of property and where it is held, but in general, the holder must make reasonable efforts, by mail or electronically, to establish contact with the property’s owner no less than six months before the property escheats to the State. For this reason, it is important for a person who owns property – including money – that is held at a financial institution or other business to carefully read communications that come from the property holder, because it is nearly always easier to prevent property from escheating than to recover it once it has gone to the State Controller.

What happens to funds in a dormant financial account?
​In general, if the owner of a financial account leaves it dormant for a period of three years, the account escheats to the State. This means that, if the owner of an account does not conduct any transactions on the account (that is, no withdrawals or deposits), does not communicate in writing (or electronically) with the institution concerning the account, does not present a passbook or similar instrument to the institution for the crediting of interest, and does not otherwise indicate an interest in the account for three full years, the account will escheat. However, an important exception to this general rule is that if the owner has multiple accounts at the same institution, activity or communication regarding any one of the accounts prevents the others from escheating. For example, if a person has a checking account and a savings account at the same institution, the savings account will not escheat to the State, even after many years of inactivity, as long as the checking account remains active.

When can the contents of a safe deposit box escheat to the State?
A safe deposit box at a financial institution, bank, or other business is treated differently from a financial account, because safe deposit boxes are provided pursuant to an agreement between the box user and the institution. The contents of a safe deposit box only escheats to the State if they remain unclaimed by the owner for a period of three years after the end of the lease or rental period, or after the termination of the agreement by which the box was provided to the owner free of charge. In simple terms, that means that if a person leases or rents a safe deposit box, the contents of the box do not escheat to the State for as long as the owner keeps paying rent. Similarly, if a business agrees to provide a customer a free safe deposit box for a defined period, such as for as long as the customer maintains a checking account, the contents of the box do not escheat to the State for as long as that agreement exists. Also, as long as the owner of the box has another financial account at the same institution which has not escheated to the State, the contents of the box are typically safe from escheat.

Importantly, subject to certain rules, the contents of a safe deposit box may be sold by the holder before being turned over to the State, so even if the rightful owner later files a claim with the State Controller, they may only receive the net proceeds of a sale, rather than the original contents of the box.

When is other personal property subject to escheat?
All personal property worth over $50.00, if it is held for or owed to its rightful owner in the ordinary course of the holder’s business, escheats to the State if it is left unclaimed for more than three years.

When can a piece of real estate escheat to the State?
Real estate typically only escheats to the State when its owner cannot be identified in a probate proceeding. If a person dies leaving California probate property, but does not provide for the distribution of that property to any person, whether by will or under the rules of intestate succession, the property escheats to the State. The California Probate Code provides that, in a probate proceeding, when property – including real estate – cannot be distributed to a known beneficiary, it shall be distributed to the State. When real property escheats to the State in this manner, subject to some public notice requirements, it can be sold off immediately. The proceeds of the sale, together with any cash or other personal property that escheated to the State through the probate proceeding, are then held for a period of five years, during which time a rightful heir may claim the property. After that, outside of a few very narrow exceptions, the property permanently escheats to the State, and will not be returned, even if a rightful owner later comes forward with a claim.

If you are interested in learning more about how to protect your property, contact us today to schedule a consultation.

​Copyright © Stone, Doyle & Heffel 2026.
 
This article is intended for informational purposes only and not for the purpose of giving legal advice for a specific person or situation. Nothing in this article should be taken as legal advice, and reading it does not create an attorney-client relationship.

Part One: Introduction to Escheat and Unclaimed Property
Many people believe that if a person dies in California without a will, their property will be taken by the State, but is that really what happens? What about funds that are left in a dormant bank account for more than three years – do they permanently become the property of the State? This three-part series of posts will address these and other questions about the treatment of property that goes into the custody of the State of California.
 
While it is true that under certain circumstances, unclaimed property is transferred to State ownership and placed in the custody of the California State Controller through a process called escheatment, a person’s heirs are not deprived of their rightful shares merely because the person dies without a will in this State, and there are processes for returning unclaimed property to its rightful owner. This post will provide a general introduction to the concept and scope of the escheatment process in California. Part Two will explain some of the more common situations in which property escheats to the State. Part Three will provide details about how unclaimed property is held and managed under California’s Unclaimed Property Law, and how a rightful owner can make a claim for unclaimed property. Part Four will discuss the rules of intestacy, which apply when a person dies without a will, and cover the treatment of real estate that has escheated to the State. Finally, Part Five will outline the actions that you should take if you are the owner of unclaimed property in California.
 
What is escheatment?
All jurisdictions in the United States have laws that allow the government to claim ownership of the property when its rightful owner cannot be located. The legal name for this process is “escheatment.” Property escheats to the State when legal ownership transfers to the government and the holder of the property places it in State custody. Most of the property that escheats to the State of California can be claimed by its rightful owner at any time, but in some situations, there is a time limit on bringing a claim for the return of the property.
 
What is the purpose of escheatment?
The primary purpose of the laws governing unclaimed property in California is to ensure that the State is in custody of the property so as to allow it to be returned to its rightful owner. This is the reason why there is no time limit on making a claim to recover unclaimed property in most cases. Other reasons for escheatment are helping to reduce the administrative burden on holders of unclaimed property, and giving the State – rather than private financial institutions – the benefit of interest-free access to a large pool of funds while they remain unclaimed. For real estate, the State has an interest in promoting certainty as to the owner of a given piece of property, and the escheatment process provides a way to prevent real estate from slipping into disuse or a legal limbo by allowing it to be sold to a new owner, while still giving the rightful owner a window of opportunity to recover the net proceeds of the sale.
 
What kinds of property are subject to escheat?
In California, all types of property are subject to escheat. This includes tangible personal property such as jewelry and the contents of safe deposit boxes, and intangible personal property, which includes financial assets such as deposits held in bank accounts, uncashed checks, securities, insurance proceeds, and even cryptocurrency. Real property is also subject to escheat, but the rules and process governing the escheat of real estate are different from other types of property.
 
Are there situations when property does not escheat to the State?
While all classes of property are subject to escheat, there are a few specific situations when property does not escheat to the State because of the entity that is holding it, such as when the property is in the official custody of a municipal utility district. Other exceptions exist for tangible personal property if it is worth less than $50.00 or if the State Controller determines that taking custody of a particular item would not serve the public interest.
 
If you are interested in learning more about how to protect your property, contact us today to schedule a consultation.
 
Copyright © Stone, Doyle & Heffel 2025.
 
This article is intended for informational purposes only and not for the purpose of giving legal advice for a specific person or situation. Nothing in this article should be taken as legal advice, and reading it does not create an attorney-client relationship.