(BPT) - Imagine logging into your investment account to check on your mutual fund, only to discover the money you invested for your child’s college and your retirement was suddenly gone. You immediately call your financial adviser or fund company and, to your surprise, learn the state where you live has deemed your account “abandoned” and required the fund company to turn it over to the state.
Though this may seem improbable, it is a story unfolding across our country. States are holding more than $40 billion in accounts deemed “lost,” “abandoned,” or “unclaimed” — and some of it could be savings you spent years building.
States are able to seize such property under so-called escheatment laws. These laws originally were enacted with the intention of allowing a state to take possession of individuals’ lost property so the state could use its greater resources (such as tax and property records) to find lost owners and reunite them with their property. Today, however, these laws instead become a huge source of revenue for cash-strapped states.
Unless the 90 million Americans who own mutual funds make regular contact with the financial institutions holding their accounts, state governments can legally require those institutions to turn these accounts over to them — and can then use the money to offset state budget shortfalls. Importantly, automated account features such as recurring deposits or regular withdrawals don’t qualify as contact under some state laws. Unless you proactively contact your financial institutions regarding your account once every three, five, or seven years (depending on the state’s law), your account can be considered abandoned — meaning the state can claim it.
Account owners can take steps to protect themselves. The Investment Company Institute recommends all owners of financial accounts take the following steps to avoid becoming a victim of these laws:
1. Visit protectyourfinances.org and click on the “What You Can Do to Protect Yourself” link to search records in states where you have lived and determine if any are holding money that belongs to you. In addition, because of the way these laws work, you should check for property in the states of Delaware, Maryland, and New York — even if you have never lived there.
2. Contact the financial institution holding your mutual fund shares at least once every three years — even if you have no reason to do so. As noted above, automated account features (such as regular ongoing purchases, or redemptions or reinvestment of dividends) do not necessarily count as contact. Just because your account has automated features or you receive regular account statements does not mean that you are protected from these laws!
3. Make sure each financial institution where you have an account has your current mailing address.
4. Open and review all mail you receive from your financial institutions, and pay attention to any notice asking you to contact the financial institution.
5. Cash any check you receive from your account, even if it’s a dividend check for a very small amount of money. (In some states, your failure to cash a check can begin the process that could lead to a state taking your entire mutual fund account.)
6. Vote any proxy sent to you.
7. Consider keeping a list of all your financial accounts, with the names of the institutions and account numbers, for family members to access in the event of an emergency or unexpected death.
Still have questions? Visit www.protectyourfinances.org for more information. Protect your financial property and don’t let state governments claim what is rightfully yours.
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