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FINANCIAL FOCUS
A TREASURE TROVE OF FORGOTTEN GAINS SITS UNCLAIMED and some could be yours!
Have you heard the one about the former janitor who left more than half a million dollars unclaimed in Louisiana treasury coffers? His company had given him stock options years ago, and he wasn’t aware of it until he got a call from state officials. Or how about the heirs in Illinois who got a call seven years after their loved one passed, saying they were owed a payout from an unclaimed life insurance policy? If you’re thinking that you’d never be unaware of where your own money is, you might be in for a surprise. More than $43 billion in unclaimed cash and property sits in state treasuries, waiting for the owners to claim it, according to the National Association of Unclaimed Property Administrators (NAUPA). This money takes many forms, but the most common sources are old bank and retirement accounts, unclaimed wages, stock certificates, utility deposits and insurance payouts. That last one is often due to the fact that people rarely call up heirs and say, “Hey Alice, I named you beneficiary on my life insurance policy.”
As president of the NAUPA in 2017, Curtis Loftis estimated that folks have a one in four chance of having unclaimed property. A test of Loftis’ theory by searching the names of four relatives on missingmoney.com revealed $130 in wages from a job held 18 years ago. Thankfully, there is no time limit on making a claim in most cases; if the owner of the unclaimed money dies, heirs can claim it, the NAUPA reports. Even famous people have unclaimed dough. A quick search of California’s databases shows Steven Spielberg has $10,000 in uncashed cashier’s checks waiting for him.
Collecting your cash Efforts by the states to return abandoned assets to rightful owners are ramping up. State governments returned roughly $3 billion of the $7 billion collected in fiscal year 2015 alone, the NAUPA reported. More good news: Searching for unclaimed money is free and simple. However, be forewarned that there are paid search scams out there that you’ll want to avoid. If you get an email or letter implying it’s from a state treasurer and asking for personal data, contact the office independently to ensure it’s legitimate. Experts say the number of abandoned accounts is set to rise thanks in part to laws meant to boost retirement savings. Since the passage of the Pension Protection Act in 2006, an increasing number of employers have automatically enrolled workers in employer-sponsored plans. This is expected to add to the pile of unclaimed money in the coming decades, especially when factoring in the rate at which people change jobs in today’s workplace.
Unfortunately, there isn’t a single uniform registry for unclaimed retirement accounts that matches the one available for pensions through the Pension Benefit Guaranty Corporation (PBGC), but one may soon be in the works. Legislation introduced in the Senate in March 2018 would create such a database to make it easier for workers or their heirs to locate stray retirement accounts. In addition, the PBGC launched a voluntary program in 2018 that allows employers to transfer money from dormant 401(k) accounts to the PBGC, which will then conduct a search for the account owners.
Organizing your assets The reasons bank and retirement accounts go unclaimed are varied, but most cases can be traced back to a failure to give notice of a new address and the increasing difficulty of keeping tabs on a sprawling array of accounts. So, how do you avoid losing track of your hard-earned assets in the first place? If your finances are messier than a college dorm room, with accounts scattered here and there, it may be time to consolidate. Nowadays, financial services firms offer both banking and investing accounts through a single login, allowing you to see an overview of all your accounts in one spot. The idea is to make it simple to calculate your net worth and how hard your money is working for you.
your portfolio is providing and help you and your financial advisor assess the need to rebalance. It also may make calculating and setting up required minimum distributions (RMDs) easier when you hit age 70½. Finally, gathering your major accounts into one tidy spot might just make things easier on your heirs should anything happen to you. If you use password manager software, user names and passwords will be shared with the trusted person you’ve named in the event of your death or incapacity. Alternatively, you can leave behind a physical list hidden in a safe place.
Tech that lets you see where you stand Those who prefer not to consolidate accounts can instead try financial software that allows you to connect a collection of assets and liabilities from different institutions, offering a comprehensive view of your finances. This makes monitoring your accounts simpler and may even help motivate you to identify and pursue your goals. However, you still need to regularly update the application with any new accounts. “This type of aggregate reporting could help reduce vagueness and enhance savings,” said Promothesh Chatterjee, a professor who published a study on the positive effects of consolidation in 2013. The most sophisticated tools will allow you to input your financial information and see the big picture in charts, run “what if” analyses, stress-test your portfolio and more.
It’s all coming together Now that you know where to look, following the online trail to any missing money should be a snap. Start with a quick search of state treasury websites, and if you do turn up leftover life insurance proceeds or abandoned assets, consider folding them into one consolidated account. Also, keep in mind that you don’t have to go it alone. Your advisor can help guide you in organizing your assets in a way that makes sense for your financial plan and makes things easier for beneficiaries. You can also turn to her or him for technology that offers a clearer view of what you own – no detective work required.
R aymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. *In the case of a transfer, under federal tax rules, you’ll have to survive such transfer for three years for the ILIT to be effective. If death occurs within three years, the proceeds will be brought back to the estate and subject to estate taxes.
