Escheatment, or escheat

Escheatment is a legal process where assets, such as shares or cash funds, that appear to be ‘unclaimed’ (i.e. held in an inactive account) may be identified as needing to be transferred over to US state ownership. This is because all assets, such as property, money, shares, and bonds, need to have a legal owner. In the US, when no legal owner can be identified, a US state government or government can claim the rights to those assets.

In the US, financial entities such as brokerages are responsible for these assets. This means they’re required by US state law to periodically review all their account holders to find out whether they’re active. When an account has shown no activity for five years, it may be identified as being inactive, which may trigger the escheatment process. Inactive typically means that the account holder and/or owner of the assets hasn’t deposited or withdrawn funds, or made a trade, such as bought or sold shares.