Anyone settling a decedent’s estate should investigate the possibility that property belonging to the decedent’s estate, or an inheritance to which the decedent has a claim, escheated to the state. Escheat is the legal process by which a person or institution with custody of a property belonging to another deposits the property with the state. Escheat is initially done for safekeeping the property to be returned to the rightful owner.
Under California law, generally speaking, tangible or intangible property that is abandoned or unclaimed for a period of over 3 years by an owner, whose last known address is in California, escheats to the state. Unclaimed property that escheats to California is transferred by the holder of the property to the state controller.
The escheat rules regarding when property must be transferred from a holder to the controller vary depending on the asset type, such as: (1) An inactive deposit bank account where the owner has left the account dormant (no activity), has not corresponded with the bank electronically or in writing, and has not otherwise indicated an interest in the deposit escheats to the State after a period of 3 years of dormancy; (2) a safe deposit box that is unclaimed by the owner from more than 3 years from the date on which the lease or rental period, or date of termination, on the box expired; and (3) for stocks and bonds, when any dividend, profit, distribution, interest or payment on principal is made but goes unclaimed by the owner.
Prior to escheating the holder of the property must notify the owner that the unclaimed property may be transferred to the State if the owner does not contact the holder. With an incapacitated person the agent under a durable power of attorney (or successor trustee in the case of trust assets) could take action to prevent the escheat. With a deceased owner, the personal representative of the decedent’s probate estate, the successor trustee of the decedent’s trust, or a surviving heir with a small estate claim could take action.
Once deposited with the state controller, the person entitled to the property has five years to claim the property. California, and other states, allow anyone to search their online records of unclaimed property using the owner’s name. Just google, “California unclaimed property search” to pull up the controller’s website.
When the property of a deceased person escheats, the Attorney General has two years after the owner’s death to petition the Superior Court in Sacramento County to determine that California is entitled to the escheated property. Upon filing the petition the court will issue an order requiring all persons interested in the estate to appear and show cause within 60 days of the order why the estate should not vest in the state. If legal proceedings to administer the estate have been instituted, such as a probate, a copy of the order must be filed in those proceedings.
If a resident of California dies without a will and without any heirs – or dies with heirs who cannot be contacted — and a probate is instituted then any assets remaining after paying the decedent’s creditors and taxes escheats to the state. The probate court will order distribution to the controller who keeps the property for 5 years from the distribution order. After 5 years the property escheats to the state.
Fortunately, as of 2015 California Escheat law provides that property rarely permanently escheats to the state. That makes it more worthwhile searching California’s unclaimed property records to claim escheated property.
Dennis A. Fordham, attorney, is a State Bar-Certified Specialist in estate planning, probate and trust law. His office is at 870 S. Main St., Lakeport, Calif. He can be reached at Dennis@DennisFordhamLaw.com and 707-263-3235.