Escheat in real estate: what you need to know

FEBRUARY 20, 2025
Escheat in real estate

Escheat is a vital concept in real estate, ensuring that property never remains ownerless. It normally comes into effect upon someone’s death without a will or legal heirs or when assets go unclaimed for a specific period. The occurrence of escheating may seem rare. However, it is important for real estate professionals, property owners, and financial institutions to understand it.

In this article, we will look at what it means. We will also see how it applies to real estate. We will discuss dormancy periods for unclaimed property.

Finally, we will explain how to reclaim escheated property. We’ll also provide valuable resources for further exploration.

What is escheat in real estate?

Escheat definition:

It refers to the legal process by which property reverts to the state when there are no legal claimants. This ensures that abandoned or ownerless assets do not fall into limbo.

How it applies in real estate:

In real estate, escheat happens when a property’s legal owner dies without a will, called dying intestate. If there are no legal heirs or beneficiaries, the real property goes to the state. The state may sell it to recoup taxes or turn it into public use.

Financial accounts and escheat

This legal process isn’t limited to real estate. Many types of financial accounts and assets can also become escheated, such as:

  • Checking and savings accounts
  • Stocks and bonds
  • Uncashed dividends or payroll checks
  • Refunds and annuities
  • Certificates of deposit (CDs)
  • Traveler’s checks and unredeemed gift certificates (in some states)
  • Customer overpayments and utility security deposits
  • Insurance payments or life insurance policies
  • Royalty mineral payments and contents of safe deposit boxes

Dormancy periods: state-by-state overview

Dormancy periods vary based on the type of asset and also depending on the state. Below are examples of dormancy periods for checking accounts, bank checks, and wages:

dormancy periods for checking accounts, bank checks, and wages

For a complete list of dormancy periods by state, visit the National Association of Unclaimed Property Administrators (NAUPA).

Other circumstances that lead to escheat

Escheat occurs not only when someone dies intestate or left an abandoned account for a determined period of time. It can also happen in specific legal circumstances, such as:

  1. Legally incompetent heirs: When heirs are unable to inherit due to legal incompetence.
  2. Illegally acquired property: When the property was obtained through illegal means and no rightful owners can be located.
  3. Criminal activity: If an heir is convicted of murdering the decedent, the state may claim the property.
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The escheat process

Here’s how the process typically unfolds:

  1. Dormancy period: Assets remain unclaimed for a state-determined period (often 1-5 years).
  2. Owner notification: Financial institutions and property administrators attempt to contact the rightful owners through notices or alerts.
  3. State custody: If no owner comes forward, the property or assets become property of the state.
  4. Reclamation opportunity: Owners or heirs can reclaim escheated property. They just need to file a legal claim and show proof of ownership. However, states usually have some statute of limitations

Legal foundations

Escheat is rooted in feudal law, where land with no heirs would revert to the ruling monarch. In modern times, the laws are designed to ensure property remains productive and taxable.

Key points to remember:

  • States must prove diligent searches for heirs.
  • Escheat laws vary widely by state and can include unique conditions for reclaiming property.
  • States often sell escheated assets to recoup funds and turn idle property into productive use.

Escheat reclamation

Yes individual property can be reclaimed. States maintain registries of unclaimed assets, often linked to the National Association of Unclaimed Property Administration (NAUPA). Heirs or rightful owners can search and file claims through state websites or NAUPA’s portal.

Challenges in reclamation:

  • Reclamation must align with state laws.
  • Statutes of limitations may restrict claims after a set period.
  • Some assets, once sold or repurposed by the state government, may be difficult to recover.

How to reclaim escheated property

Property that has been escheated to the state may still be reclaimed under certain conditions.

Steps to reclaim property:

  1. Search for unclaimed property: Visit the National Association of Unclaimed Property Administrators (NAUPA) or your state’s unclaimed property website.
  2. Submit a claim: Provide documentation proving ownership, such as ID, proof of address, or account information.
  3. Check statutes of limitations: Some states impose time limits, and other rules and regulations for reclaiming escheated assets.

Reclamation statutes are different from state to state, and because time can be of the essence, it is important to act promptly by referring to local statues for specific instruction.

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Practical implications for real estate professionals

It has direct implications for real estate professionals. Knowing how to handle escheat situations can save clients from losing valuable assets.

How to assist clients:

  1. Encourage estate planning: Advise clients to create wills and assign beneficiaries for all assets, including property.
  2. Maintain accurate records: Regularly update property and financial account information.
  3. Monitor dormant assets: Check for inactivity and respond promptly to notices about dormant accounts.

Frequently asked questions

  1. What does escheat mean in real estate?

Escheat is the transfer of property ownership to the state when no heirs or legal claimants exist.

  1. How can it be prevented?

Estate planning, regular account monitoring, and keeping contact details current can help prevent escheat.

  1. Are escheated assets reclaimable?

Yes, but reclaiming them requires proof of ownership and compliance with state laws.

  1. Who is responsible for escheated property?

Property which becomes escheated goes to the custody of the state. Any owner or heir can claim their property in a certain time period.

Wrapping-up

Escheat in real estate makes sure that a property is never left hanging in limbo. The process helps protect unclaimed or abandoned assets. However, clients should also use estate planning and asset monitoring. These steps are important to keep their properties safe. 

As a real estate professional, knowing escheat laws is important. It helps you guide clients through asset ownership. This knowledge can increase the value of the service you provide and build trust. By staying informed and proactive, you help secure your client’s assets and avoid potential losses.

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