Tuesday, November 12, 2013

Blog Post #2: Escheatment in the United States of America’s Government

Blog Post #2: Escheatment in the United States of America’s Government

By: Jordan Naffa
FIN 180
The governmental process escheatment is a broad issue that covers a variety of definitions and laws in which stating that state governments are the ultimate property owners. The concept of escheat is derived from English common law and goes back to medieval times. In these medieval times of the feudal system, the king was the ultimate landowner as opposed to the present where the United States Government has taken over this important role. According to Real Estate Analysis: Environments and Activities by Diaz III, Julian and J. Andrew Hansz the definition of escheat is a state government’s right to take unclaimed property from a deceased person dying intestate and without immediate heirs.  In order for the government to obtain a property, the estate must be unclaimed or an individual dies. Then the government is allowed by law to enter escheatment processes. This course of action allows the government to obtain a property and use it to return the property back to active.  
In the United States of America it is required of financial institutions (banks, lenders, etc.) to report when personal property has been abandoned, a resident has become deceased, or a property is unclaimed a certain amount of time specified by state law (about 5 years). Before a financial institution can consider a property abandoned the institution makes a diligent effort in tracking down any information about the owner. Efforts include finding out if indeed the resident is deceased; if so, was it testate or are there any living heirs available. If the account is not satisfied or the institution is unable to track down any information and the property remains unclaimed, then state will claim the property’s account. A process called "escheatment,” then takes place whereby the state becomes the full owner of the entity. The word escheat derives ultimately from the Latin ex-cadere, to "fall-out," in which case the property falls out of the former owners’ possession and into the state’s.

            The process of escheatment is anything but simple, however, is completely necessary actions for the government to take. Research done by The National Association of Unclaimed Property Administrators, escheatment processes are high in nonconformities that range from state to state. For example, some states require escheat reporting in the fall and others require them processed in the spring. According to Keane, dormancy or inactivity periods vary from property type to property type (commercial and residential) compounded by unclaimed property laws that are consistently changing. The escheat process can also take extended periods of time and state resources. The state processes are not perfect and there is always room for various amounts of errors and inefficiencies to take place. Nevertheless, governmental role in the escheatment process is vital to the flowing property markets.  Governmental processes and regulations change inactive prosperities into active ones that generate an enormous amount of wealth back into various governmental agencies. Although routines can be taxing and complicated, they are completely necessary.

 The escheatment process is one of complexity where one must understand all escheatment concepts completely in order to understand the laws set place in the United States of America. Government is the ultimate owner from unclaimed property and it deals with the issues of unclaimed and abandoned property to help the real estate market flow effectively and efficiently. Overall, escheatment is a process that the government must regulate since unoccupied property has the potential to become problematic. According to Real Estate Analysis: Environments and Activities, escheat is noting to sneeze at!

Works Cited 
Diaz III, Julian & J. Andrew Hansz. Real Estate Analysis: Environments and Activities. Dubuque, IA: Kendall Hunt, 2010.
Flloyd, C.F., and Allen, M.T. 2008. Real Estate Principles. 9th edition, Kaplan Publishing.

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