When you deposit a sum of money in a bank account for an extended period of time and do not conduct any other transactions on that account, you run the risk that your account could become dormant. Every state has laws relating to dormant or inactive deposit accounts. After a specific amount of time has elapsed, funds held in these accounts are surrendered to the state in which they were opened.
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Since ancient times, escheat laws have existed in many countries. The term describes the process of the state assuming control of unclaimed assets, such as when the owner of the assets dies. States escheat inactive bank accounts.
Every state defines dormant or inactive accounts differently. Generally, an account becomes inactive if the owner neither transacts on the account nor has any contact with the bank for a number of years. Banks are required to notify the state about inactive accounts, usually defined as accounts that have been inactive for at least 90 days. After a period of three to five years of inactivity, the bank must close the account and give the money to the state's abandoned property fund. Prior to doing this, the bank must attempt to reach the account holder. If these attempts prove fruitless, however, funds are surrendered to the state.
Banks encourage customers to use their accounts by assessing penalty fees on dormant accounts to prevent funds being surrendered. State laws specify the point at which banks can begin assessing these fees, but generally banks can classify an account as dormant after 90 days of inactivity. The bank can charge a dormant account fee on a monthly basis thereafter, although rules in some states limit the amount of time the bank can charge these fees. This prevents the money from becoming totally depleted in a high-dollar account.
In addition to preventing accounts from being escheated to the state, banks also charge dormant account fees for business reasons. If you never use your current account, your bank makes no money from debit card exchange fees or bounced check charges. Dormant account fees enable banks to generate revenue from otherwise underutilised and unprofitable accounts. If you have a very small balance in your account, the dormant account fee could cause your account balance to become negative, although most banks don't impose overdraft fees if an account becomes negative as a result of service fees.
When your bank surrenders money held in your dormant bank account to the state, you can get your money back by submitting a claim to the state's abandoned property fund. You must provide evidence to prove that you own the funds in question, such as a copy of an old bank statement and a form of government-issued identification, such as a passport, military ID or driver's license. The state will return your funds, but it has no responsibility to return money lost from the account due to any dormant account fees your bank assessed.
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