As several previous articles have discussed, state unclaimed property laws require a business (referred to as a “holder”) to report and deliver long outstanding liabilities on its books and records to the state so that this unclaimed property can be reunited with its owner. Before reporting the unclaimed property to the state, the holder is usually, first, required to provide written notice of the existence of the unclaimed property to owners for whom the holder has a name and address (provided their unclaimed property items have more than a minimum value) in order to give those owners an opportunity to reclaim their property from the holder before it delivers the property to the state. However, holders do not always comply with these state “due diligence” notice rules, sometimes finding it more expeditious to deliver the unclaimed property straight away to the state and hope that the holder will be indemnified by the State in the unlikely event that the owner later attempts to reclaim the property from the holder. A trio of recent wrongful escheatment cases point out the peril that such holders may find themselves in if they shortcut the state due diligence rules. Neal Gerber Eisenberg Tax Practice Group partner John A. Biek authored an article that appears in the January-February 2010 edition of CCH’s Journal of Passthrough Entities.

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