Understanding how and why you can receive interest on your property once you fully claim it is vital to budgeting your finances and avoiding unjust expenses. Let’s figure out why the state might hold your funds, how long you can expect them to hold your property, and how to speed up the process.
What is Property Interest?
Property interest is the rights of personnel and entities (businesses, corporations, etc.) that encompasses legal ownership and beneficial ownership:
- Legal ownership — A person or entity with a legal title to own property through a deed.
- Beneficial ownership — A person’s rights who receives the financial rights of a property.
The main difference between legal and beneficial ownership is that legal ownership gives a person or entity total control of the property in terms of benefits, sales, and transfers. Beneficial ownership provides a person or entity with legal rights to collect shares and benefits through the sale of a property.
What is Unclaimed Property?
Unclaimed property is property or finances that have been untouched for a > 1-year period. The main types of unclaimed property are uncashed checks, safe deposit box contents, stocks, refunds, and checking or savings accounts. A property is considered ‘unclaimed’ after inactivity and can be turned over to the state.
A person may find an unclaimed property to regain a hold on their finances or avoid any debts.
Any individual or entity can search for unclaimed money or property in their state by using the unclaimed state property office, nationwide database, Department of Labor Employer database, V.A. Life Insurance Funds from the U.S. Department of Veterans Affairs, employer pensions, FHA Insurance Refunds, tax refunds, bank failures, bankruptcy funds, foreign claims, and many others.
How is the state making interest on my property?
Every state in the U.S. has unclaimed property laws that determine what they can claim as interest. However, a standard method a state uses to make money on an individual’s property is to take over custody of unclaimed property without paying interest to the owner. This not only ensures the states financially benefit from the lack of interest on the loans, but they can reap the benefits of the property’s direct financial gain.
But, one change made in recent years is ensuring that states do not take over private property without “just compensation.” The state must show they do not take any just compensation, unless the compensation in the clause is to prevent the owner’s financial loss, and not the state’s monetary gain.
Property owners must be aware of why states pay interest on unclaimed property. A state may take unclaimed property through interest in exchange for a person’s ownership retention. Some states keep interest on the property as compensation for its upkeep of the abandoned or neglected property.
Why do some states hold property indefinitely?
As you can see, the legal restrictions of states holding property vary based on each location and its specific limits. In some instances, states can hold property indefinitely to make interest on the abandoned property without paying expenses.
States may decide they will benefit from retaining ownership over the property forever, but this depends on the ‘dormancy period.’ For example, Pennsylvania has an unclaimed property rule of three years for gaining ownership and obtaining interest on abandoned land or property.
As soon as states can claim a person’s property, the Treasury will take over continual ownership and custody of the property until the owner reclaims it. The other option is for the owner’s heir to claim the property if the original does not want to or is deceased. In some states, there is no time limit to the transfers of ownership — meaning the state can keep the property indefinitely without any new owner being nominated.
The quickest way for a person to transfer ownership of a property is to use a quitclaim deed. However, owners must check based on their specific state to see if there are other obstacles they may need to jump through, such as using a title company or working with a real estate attorney to quicken the process.
After giving up property ownership, your rights to control, exclusion, procession, enjoyment, and disposition are all given up. Need some more information about unclaimed property interest? Check out the details here!