What happens to unclaimed property in California?

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 five-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.
 
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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.