ESCHEAT
The power of a state to acquire title to property for which there is no owner.
The most common reason that an escheat
takes place is that an individual dies intestate,
meaning without a valid will indicating who is
to inherit his or her property, and without rela-
tives who are legally entitled to inherit in the
absence of a will. A state legislature has the
authority to enact an escheat statute.
In feudal England, escheat was a privilege
exclusively given to the king. The policy of inheritance was to preserve the wealth of noble families by permitting one individual to inherit an entire
estate. There was no writing of wills that would
leave property to several heirs because that would
have the effect of breaking up the estate. In addi-
tion, the law established a hierarchy of heirs who
stood in line to inherit the estate. If there was no
living person of a designated class to inherit, the
king took the property by escheat.
Historically, reasons existed for escheat apart
from the absence of heirs to inherit a decedent’s
property. When corporations were subject to
strict regulation, it was unlawful for a corpora-
tion to own property in any way not permitted
by its state-granted charter. Any property
beyond that needed by the corporation for the
operation of its business, or in excess of the
amount designated in its charter, or held for a
period of time beyond that which was permit-
ted, was subject to escheat.
Certain states mandated escheat of property
belonging to religious societies that either pro-
moted POLYGAMY or neglected to incorporate
as required by law. Additionally, where public
lands were provided for settlers, statutes fre-
quently made provisions for escheat when one
individual took possession of more than the
permitted acreage or did not properly cultivate
the homestead.
Dissimilarities
Escheat is distinguishable from FORFEITURE
even though both terms refer to a relinquish-
ment of property. Forfeiture can be applied to
any type of property interest, including posses-
sion, the right to inherit, or the right of rever-
sion. In addition, forfeiture often is used as a
penalty against an individual who has an inter-
est in property, for an illegal act. An escheat
takes place due to the lack of any person with a
valid interest in the property, and is not usually
linked to any illegality or wrongdoing.
Succession is the passing of a decedent’s
property to his or her heirs. Escheat is not
treated in law like succession; the two concepts
are completely separate.
Property Subject to Escheat
Ordinarily, the property subject to escheat is
all the property within the state belonging to the
original owner upon his or her death. Although
initially the doctrine was applicable solely to real
property, it presently extends to PERSONAL
PROPERTY, including such intangibles as bank
accounts and shares of stock. Certain other
types of property can be the subject of escheat
for lack of a known owner. The determination is
contingent upon state law.
Unclaimed or abandoned property escheats
to the state under some statutes. However, the
state cannot merely declare property abandoned
and appropriate it. Such laws must function
within constitutional limits by observing the
requirements imposed by DUE PROCESS.The
state is required to adopt a routine procedure for
notifying the public and must provide potential
claimants an opportunity to argue that the
property might belong to them.Without declar-
ing that certain abandoned property has been
escheated, the state may lawfully possess the
property and hold it for a period of time so that
claims can be asserted. A state is not mandated
to take over unclaimed property but may choose
to exercise the power to escheat only when the
value of the property does not exceed the
expense of legal proceedings.
Items subject to escheat under various
statutes include abandoned bank accounts,
deposits left with utility companies, stock divi-
dends whose owners cannot be found; unpaid
wages; unclaimed legacies from the estate of a
deceased relative; insurance money to unknown
beneficiaries; and unclaimed money retained by
employers or public officials.
Certain statutes specify that the property of
charitable or religious institutions escheats upon
dissolution if its donors have not retained the
right to recover it when it is no longer used for
religious or charitable objectives.
Procedure
Escheat statutes vary by state, but all pre-
scribe a procedure for location of the rightful
owner. In some states title to certain types of
property automatically passes to the state when
it escheats for lack of a proper claimant. In other
states, a required period of time must elapse
prior to the commencement of escheat proceed-
ings. This does not bar a claimant from stating
his or her claim before completion of the escheat
proceedings. Some laws require claimants to
assert their rights within a period of time or for-
feit them. Often, states mandate that individuals
administering estates notify the state govern-
ment of the existence of property that might be
subject to escheat.
The primary burden of proving that there is
no proper individual entitled to own the prop-
