Unclaimed property laws have been in existence for many years. These laws authorize states to claim assets that have been “abandoned” by their owners. Members of the Pennsylvania Institute of Certified Public Accountants advise that the Pennsylvania Unclaimed Property Act changes abandonment definitions for Individual Retirement Accounts (IRAs). The new law came into effect Sept. 11, 2016, and taxpayers should be aware of these changes and be sure to take appropriate steps to keep their retirement savings secure.
The range of unclaimed property that may be claimed by the states is broad, and includes property that one would expect: bank accounts, investment accounts, certificates of deposit, corporate stocks, private and public bonds, and proceeds of life insurance claims. Also included is property that might be a surprise to some, and that many people have: uncashed paychecks, refunds of utility deposits, rebate checks, unused gift certificates, money orders, travelers’ checks, and unclaimed contents of safe deposit boxes.
In Pennsylvania, property is generally deemed abandoned if the owner has not been in contact with the institution or business that holds or owes the asset for a specified period of time, which in most cases is three years. Making a deposit or withdrawal to a bank account, receiving statements and tax reports, and corresponding in writing to the holder all count as making contact.
Often what triggers the start of the clock on the period of abandonment is when mail to the owner of the account has been returned as undeliverable.
New Pennsylvania Law
Many states, driven by the need to fill budget gaps, have in recent years begun to actively, and in some cases aggressively, enforce their unclaimed property laws. Pennsylvania is among those states seeking to increase its revenue from unclaimed property.
Prior to the changes to the Pennsylvania Unclaimed Property Act, an IRA was subject to the Pennsylvania unclaimed property law only after minimum distributions were required, a period of time that starts when the owner reaches age 70 ½. Beginning with the effective date of this law, IRAs will be subject to claim by Pennsylvania regardless of the age of its owner.
This means that Pennsylvania residents who own IRAs and their financial advisors need to be active in protecting their retirement savings. The best way to accomplish this is to make sure their IRAs and other accounts never become unclaimed property as defined by the state of Pennsylvania.
Although property that has already passed to a state can be recovered, the owner will only be repaid the amount that was originally claimed by the state. Any return that could have been earned if the money had remained invested is lost. So although “better late than never” is true, “better never late” is more beneficial.
Prevent Property Loss
Contact the financial institutions with which you do business. This is perhaps the best way to keep track of your assets and prevent your property from being deemed “abandoned.” Whether it’s a bank, insurance company, or any provider of your IRA, keeping regular contact with those institutions means you’ll be more aware of where your money is. It also presents an opportunity for you to update those institutions with your most current contact information in case they need your attention for any reason.
It’s also important to pay attention to all of your incoming mail from financial institutions. In the age of mobile banking, it’s easy to neglect mail coming from your institutions that are bank statements, account notices, bills, etc. However, even if you are receiving all of those documents via your mobile app, it’s also important to open every single piece of mail that you receive from those institutions. You might stumble upon information that your mobile app is incapable of providing. You may even receive mail that requires immediate attention.
Writing down your account information is another way you can protect your assets in the long run. In the event that you become incapable of controlling your finances for any reason, you’ll want a relative to be able to access your accounts so they can keep them protected for you.
Assets That Have Been Claimed
If your property ever gets claimed by the government, it is not too late. The Pennsylvania Department of Treasury
provides anyone who has lost their property the opportunity to reclaim it. It’s also important to widen your search so that you can find unclaimed property in the state you currently live or anywhere you previously lived, whether it’s another state or another city of your current state of residence. If you are a resident of another state or may have lost property in another state for any reason, The National Association of Unclaimed Property
may be a good source for you to relocate it.
Your CPA Can Help
Your CPA can provide assistance to help you prevent your accounts and assets from falling within your state’s definition of “abandoned” property. Find a CPA
near you, or visit www.picpa.org/moneyandlife
for more personal finance tips.