Industry

When you’re essaving, don’t get escheated…

Well, if a car is sitting on the street in Baltimore for three years and you decide to “escheat” some parts for a project you’re working on, *YOU* can be arrested for “theft”. But if Delaware comes along in their low-rider state vehicles and circles your investment account enough times and decides that it’s safe to perch on the carcass, they can do that with impunity.
With changes to the definition of what makes an account “abandoned” or “unclaimed”, Delaware and other states have decided to make it easier on themselves to convert your property to be THEIR property – and are clearly only guided by greed in the name of public benefit. There is no “public benefit” argument to be made here. It’s not like people are calling their elected officials, complaining that all these investment accounts are just sitting at the curb, becoming eyesores.
One of the reasons that people with brokerage and bank accounts should be concerned is that, if you don’t do anything but reinvest your dividends on an account for three years, the state says that means it’s abandoned and they can take it.
Let’s think about that for a minute. If you’re retired and you want to travel, then you may very well have a Direct Reinvestment Plan – an account that is exactly what the State of Delaware thinks of as abandoned after three years of faithfully reinvesting your dividends. You’re going along your merry way and suddenly, you find that the account that you set up specifically so you wouldn’t have to pay much attention to it, has been appropriated by the state because you didn’t pay much attention to it.
A possibility to explore is to create a new type of order. A “Refresh Order”, if you will. Currently, most orders (sell or buy) are tied to time and/or price. Why not an order tied to time alone? If one were to put such an order to sell and then immediately buy back one share of stock, that would qualify as “activity” and keep the account from becoming abandoned. However, it is likely that states would require that this could only be used once and then it would require actual contact to place another such order or otherwise prove “Positive Customer Contact”.
And that’s the heart of the matter. States are changing the definition of what constitutes Postitive Customer Contact to exclude lack of returned mail as a criteria. This makes it easier for the state to get its hands on your money and makes it harder for you to keep it out of their hands.
Barring some kind of “Refresh” transaction that can be ordered ahead of time, it will require more vigilance on the part of both the customer and the brokerage to keep the money out of the state’s hands. For customers who haven’t used mobile or even online methods to communicate with their brokerage, this could be further motivation to begin doing so. Even a balance inquiry or email exchange online or from a smart phone can count to update “Date of last customer contact” and keep an account out of the clutches of the escheat vultures.
Brokerages and financial institutions can do more for their customers in this matter by ensuring that online activity counts as contact – and not necessarily monetary activity…just logging in to their account and email from a customer should update a Date of Last Customer Contact . Additionally, brokerages and financial institutions need to be extra vigilant during system backups, data conversions and other system events, so that non-numerical data or other data that would update the date of last contact is not overwritten, not converted or otherwise lost.
I think what I’ll do is specify that a copy of any trade notification be sent to the Unclaimed Property Division in Delaware. This is not required by Delaware. Indeed, they aren’t expecting it at all. Suddenly receiving notifications that I’m making trades on my account will probably confuse the hell out of them, in fact. Which is exactly why I’ll probably do it. Join me?

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