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Turn a cost-center into a profit center with asset recovery

Posted By Administration, Tuesday, November 22, 2016

For many companies, unclaimed property represents a cost center. It’s a necessary function that can be labor-intensive to administer and, thus, costly. However, offsetting the expenses associated with unclaimed property is possible, by seeking unclaimed property that belongs to the company.


“There is more than $100 billion out there for companies to claim,” says Kim Sawyer, president and general counsel for The Locator Service Group. “That money is not just the $41 billion plus held by state abandoned property offices, but there are billions more held by cities, counties, federal agencies, courts and foreign government agencies.”


Recovering the company’s piece of that $100 billion pie is certainly appealing and beneficial, but doing so often requires overcoming a lot of challenges. Simply tracking down the property owed to a company is the first major challenge. Only a small percentage of property is posted online. Some states publish items only when they’re over a certain age or dollar amount, but these thresholds aren’t consistent from state to state. 


In addition to the online search limitations imposed by the states, the data that is searchable likely excludes a substantial amount of property held by cities, counties and other entities.


Because states and other entities often choose not to publish the actual value of the property they hold, companies may spend substantial time pursuing a claim, only to find out its value is miniscule.


Companies attempting to recover assets may also run into a spectrum of challenging scenarios that vary by property type and state, including:

  • Some states require indemnity bonds on the property that has been escheated.
  • Many states send escheated shares that are being claimed back to the transfer agent. To get paid by the transfer agent, the property owner needs a medallion signature guarantee from a financial institution. In large companies, the people who are able to acquire such a guarantee are at very high levels.
  • An increasing number of states are requiring holder verification. Property owners have to prove they had a business relationship with the holder and that no other owners are associated with the property.
  • Some entities require a corporate seal. However, a lot of corporations today are LLCs that don’t have a corporate seal.
  • Some states require that the person claiming the property is an authorized signatory for that actual company—not the parent company. When recovery is centralized, that can present a challenge.

“Something that is seemingly so easy, isn’t really easy at all,” Sawyer says.


So how can companies recover their funds effectively? At a minimum, they should contact the state where they are located or have a significant presence and ask them to search on their behalf.


“If you’re a large company and you don’t provide an overwhelming list of names—just five or six subsidiaries with the largest presence in the state—they may be willing to do that for you,” Sawyer says. “Frame the request in terms of, ‘We escheat a lot of property to your state; I would greatly appreciate you helping us with this request.’ They often will help if the request isn’t overly cumbersome.”


Submit similar requests to cities and counties where the company is located, as they too may be able to assist.


Additional steps that can make the recovery process easier include:

  • Create a corporate library: Unclaimed property claims frequently require documents that verify the company’s relationship to its subsidiaries and predecessor companies. Maintaining a library of these documents makes the process easier and more efficient. The library should include: merger and acquisition filings, name change and fictitious name filings, an Internal Revenue Service letter containing the tax ID number, and a list of current and past real estate holdings.
  • Develop and maintain relationships: Government agency recovery personnel can be great assets. Maintain a database of employees who have proven helpful at the city, county and state levels so you can call on them again as needed.
  • Annually review filings: Put a process in place to review refund filings to make sure they have been received. The largest property claims are often tax refunds.

Companies may choose to retain third-party specialists to assist with recovery. Proper vetting of these companies is essential.


“If you hire a third party on a contingency fee basis, it can be a win-win,” Sawyer says. “However, make sure your company’s interests are aligned with the third party." Some third party recovery companies only work in the state or states they are licensed to do business in and will not have the ability to search for your corporate funds nationwide. If your company is looking for a nationwide search of their unclaimed funds this would be a question you should ask up front.


Turning unclaimed property from a cost center into a profit center is an appealing prospect, but the challenges can be daunting. By putting systems and processes in place, however, companies can begin to reap the benefits of recovering assets that are rightfully theirs.


To learn more about recovering unclaimed property, join Sawyer and Nora O’Connor, NCM Solutions, as they lead the Take it or Leave It session at the 2017 UPPO Annual Conference. The event will also include an Owner Representative/Asset Recovery Industry Breakout session to help professionals exchange information and network with fellow attendees with an interest in this topic.


UPPO members are also encouraged to designate that they do asset recovery as part their job. If you recover property for your company or for owners, email us to tell us you do, and we’ll make a note on your profile. 

Tags:  asset recovery  unclaimed property 

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