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UNCLAIMED PROPERTY FOCUS is a blog written by and for UPPO members, featuring diverse perspectives and insights from unclaimed property practitioners across the U.S. and Canada. We welcome your submissions to Unclaimed Property Focus. Please contact Tim Dressen via tim@uppo.org with any questions about submitting a blog post for consideration and refer to our editorial guidelines when writing your blog post. Disclaimer: Information and/or comments to this blog is not intended as a substitute for legal advice on compliance or reporting requirements.

 

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Whose Property Is It, Anyway? – A Brief History of Escheatment Law

Posted By Administration, Sunday, January 20, 2013
Updated: Friday, January 18, 2013

Children may be fond of the phrase "finders keepers, losers weepers” but unclaimed property professionals know this is rarely the case and state escheatment laws are never as simple as calling "dibs” on abandoned assets.

So, where did our confusing patchwork of unclaimed property laws originate and how has it evolved over the years?

Blame Our Forbearers

Like many time-honored American traditions (whiskey and fried food come to mind immediately), the concept of unclaimed property was first established in feudal England. The term "escheat" derives from the Latinex-cadere ­– meaning "to fall out.” Under English common law, any lands held "by tenure” (i.e., occupied by someone other than the owner) were returned to the feudal lord upon the death of an heirless tenant.

The idea behind escheatment laws was simple: when a landholder died, went to war or was convicted of a crime and imprisoned, his property reverted to the landowner in order to ensure its continued productivity and to prevent "squatters” without inheritance rights from usurping land that did not belong to them.

Following the Norman Conquest of England, the monarch became the sole "owner" of all the land in the kingdom, a position that persists to the present day. The king then granted land to his favored followers, who became"tenants-in-chief,” under various contracts of feudal land tenure. Such tenures never conferred ownership of land but merely ownership of rights over it. This distinction between ownership and stewardship of unclaimed property would be a hallmark of later U.S. laws.

Seems logical enough, right? All land belongs to the state (or in this case the crown) and reverts back to the crown once the holder is dead or otherwise loses his claim to the property.

Early common law forms of escheatment applied only to real estate – the concept of bona vacantia ("ownerless goods”) emerged many years later as a statute provision governing personal property without a clear heir.

Crossing the Pond

Inspired by English common law and the Magna Carta, property rights are among the most uniquely important elements of U.S. law, so important that they were codified in the Fifth Amendment of the U.S. Constitution.

The philosophical basis for U.S. escheatment law is not as clear as its feudal roots, but 19th century writings indicate the principles are similar, with individual states taking the place of feudal lords and the monarchy. William Draper Lewis, the dean of the University of Pennsylvania’s Department of Law in 1898, wrote:

"It is a general principal in the American law…that when the title to land fails from defect of the heirs and devisees, it necessarily reverts or escheats to the people, as forming part of the common stock to which the whole community is entitled…and the lands vest immediately in the state by operations of law.”

Over the years, there have been several statutory changes to U.S. unclaimed property laws, many resulting from court challenges in the 1930s and 1940s. The first nationwide unclaimed property law debuted in 1954 and was drafted by the Commission on Uniform State Laws. This model Act was commonly known as the Uniform Disposition of Unclaimed Property Act (UDUPA), but it soon became apparent that multiple liabilities (with different escheatment laws being applied to the same property holder doing business in different states) would be problematic.

Goin’ Through Changes

UDUPA has since been superseded, first by the Revised Uniform Disposition of Unclaimed Property Act (RUDUPA – 1966) and later by the 1981 Uniform Unclaimed Property Act (UUPA) which would be adopted by 26 U.S. states, the District of Columbia and the U.S. Virgin Islands. The 1981 Act was the most comprehensive of all in that it not only included various definitions for certain property types, but this Act also included language that would give the state the right to create an estimated liability in the absence of records. It also included penalties, interest and audit cost provisions and a records retention requirement.

Revised in 1995, the Uniform Act was broadened to include additional property types (such as gift cards, royalties and mineral interests); and the new Act doubled the penalties and audit fees for failure to comply with the laws. The 1995 Act also shortened dormancy periods and generally streamlined the process of escheatment for both holders and state regulatory agencies.

Modern wrinkles continue to challenge unclaimed property administrators, holders and associated service professionals, such as lawyers and accountants. The advent of Internet gift cards, paycards and other newly created forms of intangible personal property has caused many states to update their escheatment laws. But the primary foundation in which these laws were drafted has remained unchanged since the 1950s – reversing the old "finders keepers” adage in favor of a new approach: a virtual, state-by-state "lost and found” box.

For further reading:

Escheatment Laws and Regulations (from coveringcredit.com)
Unclaimed Property Laws, Compliance and Enforcement (Adreoli/Spotswood-CCH)

Unclaimed Property Laws and State Authority (Bureau of National Affairs)

The U.S. Securities and Exchange Commission (SEC) Escheatment Page


This information is not intended as a substitute for legal advice on compliance or reporting requirements.

Tags:  FAQs  Policy  UP Laws  UP101 

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Voluntary Disclosure Agreements (VDAs): Weighing the Pros and Cons

Posted By Administration, Sunday, January 13, 2013

Voluntary disclosure agreements, or VDAs, are commonly used to pro-actively and voluntarily report unclaimed property assets to state regulatory authorities. All states encourage holders of unclaimed property to file their unclaimed property reports voluntarily, as it allows states to generate revenue that it may not have had if a holder hadn’t come forward to disclose its liabilities.

VDA programs can be either informal or formal, depending on the state. States also understand that not every holder is knowledgeable in the area of unclaimed property, so state administrators are often willing to work with a business once it has become aware of its unclaimed property reporting obligations.

What are some of the benefits of entering into a voluntary disclosure agreement? Here are just a few:

  • The ability to control the review
    • Determine property types
    • Manage the property
    • Review procedures to assure they are adequate to comply with the unclaimed property requirements
  • The look-back period is usually shorter and/or limited than that of an audit
  • Usually provides for an abatement/reduction of interest and penalties
  • Establishes a rapport with the state administrator
  • Provides indemnification against claims filed once the property is accepted by the state(s)
  • Allows for additional time to submit reports

What are the possible drawbacks to VDA programs?

  • Must complete the due diligence and reporting within the timeline afforded by the VDA
  • Must maintain unclaimed property compliance moving forward after completing a VDA

Most VDA programs are available to holders unless one of the following applies:

  • The holder is currently undergoing an unclaimed property audit
  • The holder has been contacted by a state or a third party auditor retained by a state
  • The holder has not previously reported or has omitted/under-reported property

UPPO recommends contacting the state(s) where your company is required to file to determine the specific details (please note you may inquire anonymously, if you prefer).

 

Resource links


This information is not intended as a substitute for legal advice on compliance or reporting requirements.

Tags:  Education  Members  UP101 

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Unclaimed Property Focus: A Trusted Source of News & Information

Posted By Administration, Friday, January 4, 2013

As the premier resource for unclaimed property information, education, networking and advocacy for the private sector, UPPO is pleased to launch Unclaimed Property Focus, a place to discuss and share the latest news and trends that matter most to unclaimed property professionals.

Our unclaimed property experts will offer regular commentary and insight about easing the burden of reporting, eliminating confusion, simplifying compliance issues, and ethically returning property to rightful owners.

Unclaimed Property Focus is also a place for our members to share best practices from their own industries, reflect on their experiences at UPPO events and provide legislative policy updates from their states.

Upcoming topics will include:

  • Voluntary Disclosure Agreements: Weighing the Pros and Cons
  • A Brief History of Escheatment Law
  • Regulatory UP-date, a recurring feature with legal/government news
  • Third-Party Due Diligence Services for Unclaimed Property Holders

We welcome submissions from UPPO members that highlight topics of interest to unclaimed property holders and service providers. Posts should be 300-500 words in length – images, video clips and/or external website links are encouraged (please ensure you have usage rights and/or give proper credit to sources for photos and videos).

E-mail blog@uppo.org to suggest a topic, submit a blog post or receive more information about our editorial guidelines and deadlines. UPPO can also help you draft a post in your own words, inspired by your unique perspective on unclaimed property issues.

We’re looking forward to sharing your contributions with the rest of the UPPO community!

Tags:  Education  Members  News 

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