DennisBeaverMay 10, 2008 (Original publish date) • By Dennis Beaver

Patti Davis is a longtime Hanford reader who almost had a real problem with Bank of America, caused by an incompetent bank representative.

What nearly happened to Patti would have easily taken her months to resolve. But she is not alone, as everyday, California residents with a bank account or safe deposit box are at risk of their money or property falling into the hands of the State of California, the result of two words: Dormant Account.

This is an important legal concept to understand, so let’s help you avoid being caught in the trap of what happens with apparently lost, abandoned, or forgotten property. This is not some conspiracy of the State of California to steal your money, but is a legal notion going back, literally, hundreds of years, very much alive and well today in every U.S. State.

California State Assemblyman Roger Niello defined a Dormant Account this way when he and I discussed this problem facing millions of Californians:

“If you or someone in your family has a bank account, safe deposit box, stocks, mutual funds, dividends, insurance policies, trust funds, or money or checks in almost any form which has been dormant — just sitting there with no activity for only three years — you are at risk of having the State claim that property. That’s right, it could all become property of the State of California and go into the General Fund.”

“We all know of family members who set up a small savings account for the kids or grandchildren, to be used for college, or some other purpose, but perhaps never revealed. No one knows how many of these accounts are simply lost, because financial institutions are required by law to turn dormant accounts over to the State. So often the beneficiaries were unaware the property even existed, for many reasons, such as death of a family member, having moved or forgotten about,” he pointed out.

The Unclaimed Property Law

When someone dies with no will, or heirs of any kind, their property winds up with the state in which they lived. We call this Escheat. We say the property escheated to the state. That’s the legal background to Unclaimed Property laws which every state has enacted. This amounts to billions of dollars a year across the nation. This does not mean the property is lost forever, but that can result.

The reason behind Unclaimed Property laws is Protection of those assets, preventing a financial institution keeping the money themselves.

States are required to help locate those with a legitimate claim to lost funds. That was the original intent, with the unclaimed time limit originally 15 years in California But as it became clear there was a lot of money just sitting there, many legal experts feel the time limits were shortened to let that money go into the State’s General Fund if no one came forth to state a claim. From 15 years, it’s now three years.

What do you mean Uncle Charlie was a millionaire?

While it is rare for a person to die with no heirs, it is a lot more common for property to appear either lost, abandoned, forgotten about, or, as in the case of bank accounts or other money instruments, dormant. So now, after three years, the bank or other company holding the funds is legally required to transfer it to the State. Last year, nearly 600 million dollars fell under control of the State Controller’s Office.

Patti’s account wasn’t dormant

“My checking account and a trust account for my niece are linked together, appear on my statement, but the trust account will go to her when she is 18. It does not require doing anything, as only a relatively small amount of money was placed there years ago, earning interest.” Patti told me.

Yes, one account did not have any activity, but it didn’t require any activity! So, why would the Bank of America representative tell her just the opposite?

“She was nearly put through months of hassle by a common problem facing customers of many large banks,” Harold Hansen, Vice-president of Citizens Business Bank told me. Mr. Hanson has over 40 years in banking and has been in senior management positions, including CEO during his career. If anyone knows how banking — and how competence of personnel — has changed, he does.

“The account was absolutely not dormant. These kinds of mistakes happen far too often today, where training in the big banks is frequently an afterthought,” he concluded.

In discussing this case with John Chang’s Office, I spoke with Halley Jordan who put it this way:

“Since 2000, if an individual has two or more accounts at a financial institution and one is active, then none of the accounts or deposits escheat to the State. It is Code of Civil Procedure section 1513. The Bank employee obviously did not know the law, and should have.”

Halley also was quick to point out that her boss is trying to change the law, eliminating the requirements of banks sending contents of inactive safe deposit boxes to the State, “if the owner has another active account at that institution.”

Our recommendations

Sit down with family members and go over insurance policies, bank statements, bank books, investment records, anything that concerns money or income being held in an institution, or payable, such as oil lease royalties. Even going in and having a bank book updated will start the three year time period again.

Financial institutions are required to send a letter advising they fear an account might become dormant, if a great deal of time has elapsed with no activity. While Patti was in the right, I told her to make a 10 dollar deposit to that account, just to be sure.

Finally, visit the State Controller’s Web site for information on how to find out if they have money belonging to you. They have a toll-free phone number, and I found them to be extremely polite and helpful when, just to test them, I phoned to see if they had anything from my family which had been unclaimed.

They did, a college savings account my father began for me and with time, forgotten in a haze of illness so many years ago. In a matter of weeks I received a check in the amount of $4,500 from the State. And what did I do with that money, you might wonder?

It helped to pay the college tuition for the grandson my dad never met.

Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.