TheAgitator.com
Taking Stock
Tuesday, July 20th, 2004Reader Matt Gaffney writes:
Just received the following note from Charles Schwab. I haven’t made any stock trades in a couple of years, so the state wants to know if it can steal my portfolio! As you can guess, I am not making this up (typed from a US mailed letter):
Dear Schwab Customer:Please take a moment to read this important notice regarding your Schwab Account #….
The unclaimed (abandoned) property laws of your state of residence require that Schwab contact customers who have not had any “activity” in their account for a specified period of time. Although you may receive a regular account statement for your Schwab account identified above and you may also receive a Form 1099 annual tax statement, your state of residence does not recognize your receipt of these mailings as “activity”…
Please respond by August 6, 2004. If we do not receive your response by this date, the law requires us to regard your account as abandoned property. Your account balance (cash and/or securities) will then be sent to the unclaimed property unit of the government of your last known state of residence. Once that is done, you should be able to recover your property by filing a claim with the state. However, this can be a time-consuming process, and some states elect to sell the securities we send to them…
Gaffney notes that he got the letter today, July 20. That gives him 17 days to make the claim — not much warning if, as Gaffney notes, he had been on vacation.
Anyone know anything about the law, here? Sounds rather outrageous to me.
The law exists. It is supposed to protect persons who move and forget about an existing bank account or investment account. In some states, the banks or investment firms could just take the money in “inactive” accounts. Now, they have to make efforts to notify the owner. If that fails, the state takes control of the funds, giving the owner a central place to look. The state holds the funds for a specified period of time before confiscating them.
http://www.sec.gov/answers/escheat.htm
Generally speaking, keep in mind that there is such a thing as “abandoning property” (at least personal property — real estate is an entirely different matter). I don’t think it’s fair to summarily dismiss this as “the state stealing a portfolio.” As Dr. T points out, there is a benevolent explanation for the escheat laws.
And the property will be listed in a state advertisement, the main purpose of which is to prominently boost your politically ambitious state treasurer’s image, so you say “Oh, s/he would make a won-der-ful governor, s/he helped me claim a fortune in money I had completely forgotten about.”
Don’t worry about it in the long run. Eventually there will be regular activity in your account, an annual federal raid on it to help keep Social Security solvent. Because we mustn’t let the rich have an unfair advantage, even in old age.
Dr. T writes:
“The state holds the funds for a specified period of time before confiscating them.”
Any idea how long this is, T.? The Schwab letter I have states only that reclaiming an expropriated (sorry, but that’s the right word, kids) account “can be a time-consuming process, and some states elect to sell the securities we send them”.
This doesn’t sound benevolent, and doesn’t sound like it’s done for my protection. It sounds like government trying to get its mitts on as much money as it can.
Clever header, BTW, RB (”Taking Stock”).
Matt,
Just one example of why this system is not just pure evil is for estate purposes. Let’s say you died and neither the beneficiaries nor the executor/administrator of the estate knew of the abandoned account. Either before or after probate, the abandoned property law will allow either the money to find them, or them to find the money.
Similar: what if YOU forgot about the account (say due to incompetency). Again, the APL allows your guardian/conservator/etc. to reunite you with your money.
Another example would be security interests — I might want to “abandon” my assets to evade valid creditors (or are all creditors now evil too?).
Kip,
Do you happen to know any details about APL in various states? I can see how it might be a benevolent way for long-lost people and property to be reunited by friendly government, but forgive my skepticism in thinking that governments may use this law to declare as much property “abandoned” as quickly and easily as possible, after which it may flow into government coffers. This is a tendency of government — see our traffic cameras here in D.C., which are placed not at the most dangerous intersections, but where government officials have calculated they will garner the most revenue.
I’m highly suspicious that I have such a short period of time to let Schwab and Uncle Sam know that I’m aware I own my stock portfolio before it gets taken by the feds. I’m also highly suspicious that my financial institution tells me that once the money’s in their system, getting it back “can be a time-consuming process” and that some states “elect to sell the securities we send to them”. That doesn’t mention a grace period.
So Kip, while I can see how the crafters of this law may have had good intentions, the tendency of government to maximize its revenue makes me wonder. If anyone knows any state-by-state details I’d be curious to hear about it.
Matt, you can check the SEC link in my earlier post — it forwards to a site where you can check the rules state-by-state.
Thanks for the link, Kip. According to the site, the state holds the money indefinitely for the owner to claim. This makes me think now that when the letter I have says “some states elect to sell the securities we send to them,” it means that it sells the stocks but keeps the proceeds for the owner to later claim — not, as I read it, that the state sells the stocks and keeps the money.
If this is the case, then I was wrong: the government is not expropriating any money. Good! My only remaining complaints are that I only received a 17-day period in which to notify them, and that the government is contacting me after such a short period of inactivity (about two years).
Thanks again Kip and others for shedding some light on this. Credit where credit is due — this mostly doesn’t appear to be a case of government overstepping its bounds. Hallelujah.
Yeah, Matt, but Social Security still sux.
Don’t listen to KipEsquire… He’s apparently an attorney, and everyone knows that ALL attorneys are PURE EVIL and should not be trusted to give you advice, let alone stand next to the leader of the free world at the State of the Union Address…
You should just do what the county club set does when they need legal assistance… uh, wait a minute, they go see lawyers, too… but only because their gardener, nanny and maid are all undocumented aliens who don’t speak English!!! Damn those immigrants and their foreign languages, wanting benefits, education and insurance!!! They’re just like lawyers, sucking dry the people who EARNED their money, like, um, er… well, I’m sure there’s SOMEONE at the country club who has actually worked somewhere other than their father’s brokerage firm sometime in their life…
Something I’ve noticed lately, but have waited until now to comment on, is the marked improvement of Radley’s spelling, grammar and usage. Two years ago, spelling and grammatical errors were the norm… What has changed, Radley? Do you have your intern typing this blog now? Did you finally discover the ’spellcheck’ feature of your computer software? Are you actually an evil cyborg replicant of Radley, that has both Funk & Wagnall’s and Strunk & White installed in your memory bank for instant recall?
Whatever the difference may be, it certainly makes it easier to read The Agitator these days, now that we’ve all come to an agreement regarding proper American written English…
Hey Joe,
Properly,
that should be
“correctly written American English”.
Probably..
OK. Who let Joe Sims out?
I forgot about a utility security deposit in the early 90’s. State had it. They do make you jump through hoops to get it. If I remember correctly, one of the hoops was on fire.
Um, in my defense, I don’t think grammar and usage were ever a problem.
Spelling I’ll cop to.
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