Fireside Chat w/ Tommi Harris on Unclaimed Funds

08-19-2020

vmcontent|08-19-2020

This Fireside Chat was recorded in August 2020; information and details may have changed since that time.  Please contact your Verde Advisor for more up to date information.

 

Have you ever heard of Escheatment? You may have heard of ‘unclaimed funds.’ Either way, through understanding what this is, we could help you to find extra money that’s been lost to the universe! On August 19th 2020, we had Verde’s Investment Advisor Tommi Harris discuss this topic, and the fascinating (and exciting!) implications of what this could mean for the money that our investors have. Included in this post are a video recording with time stamps, as well as a general transcription of the chat.

2:38- Fireside Chat Explanation

Cindy Lundberg(CL): Some of you may be wondering why we call these Monthly Webinars the Fireside Chat. The name came about as a nostalgic reference to Franklin D. Roosevelt who used this medium to present his programs and ideas directly to the public originally in response to the banking crisis and recession. For us, this came about earlier this year as our response to the market volatility and pandemic.

 

Our mission is to Educate, Guide, and Grow, and it’s our privilege to bring these Fireside Chats to you on an ongoing basis.

 

3:08- Introductory Story: Walter and His Unclaimed Funds

During today’s presentation you’ll hear from Tommi Harris, one of Verde Capital Management’s investment advisors. There will also be a Q&A session at the end of the presentation, so please submit you questions using the chat feature or by responding to our invite email. Now without further delay, I’ll turn it over to Tommi Harris(TH).

 

TH: Thank you, Cindy. Good Morning, everyone. Thanks for joining us today. Today we’re actually going to be talking about Escheat or Unclaimed Property. And earlier this year I listened to a story on a podcast about a guy who had a small fortune taken from him. His name was Walter. 

 

CL: Oh no! How did that happen!?

 

TH: Funny you should ask Cindy, here’s how it happened. A little background on Walter first. Walter was Italian, and in the late 90s, he had an idea to start a company selling Italian specialty products online. Largely to Americans, like coffee machines, ect. At first things were going really well, except for that, around the same time, another online retailer launched named Amazon. They were bigger and seemed to have endless money, and at that point were not worried about turning a profit.

 

CL: Something tells me this is not where things go south for Walter. It was unfortunate for sure, but how did he lose a small fortune?

 

TH: You’re right. Walter had a brilliant idea, and he said, “If I can’t compete with Amazon, I should invest in them.” And that’s what he did. He set up an E-Trade account and bought a few thousand dollars worth of Amazon stock. Now mind you if you just joined [the fireside chat], this was in the mid-90s.

 

CL: He saw another great investment opportunity.

 

TH: He sure did. Walter followed the buy-and-hold strategy for a very long time. Buy the stock and just let it sit was his philosophy. He made a point not to log into the E-Trade account that held his Amazon stock.

 

CL: And if you believe in a company, you buy the stock and you hold it, similar to what Warren Buffet does. So what went wrong?

 

TH: Well, he did just that. He waited until 2015, around 20 years, to finally cash in that Amazon stock, but during those 20 years, he never logged into his E-Trade account. Not once. He just set it and forgot it. At that point, the stock he’d bought for around $5,000 dollars, should be worth around $100,000. And so after years and years of not looking, he finally logged back into his E-Trade account. 

 

He’s quoted saying, “When i logged in, I saw nothing. The account was empty.” So it was a big shock. Imagine that, logging in and seeing nothing, he was shocked to say the least. So he called E-Trade and E-Trade told him, “yeah you’re going to need to speak to someone at the State of Delaware.” Walter said “Delaware?” and that’s where E-Trade was incorporated, and they also told him, specifically, “you should ask for the Delaware unclaimed property office.”

 

So, Walter calls them, and they explain to him some terrible technical term, Escheat or Escheatment. So today, during this fireside chat, we’ll discuss what this means, how the government ends up with a stunning amount of our assets, or how you (or Walter), can get that money back.

 

6:360- Ever wonder if you have money out in the universe you don’t know about?

-Have you ever washed a pair of jeans, only to find that when they came out of the drier, you found some cash in the pockets? Remember that feeling of excitement, when you realize you have money that you didn’t know you had?

 

Do you know that there could be free money out there in the universe somewhere, that is yours, that you don’t even know about? So, let’s find out.

 

7:03- What is Escheatment?

It’s most commonly called unclaimed property. It’s essentially the act of the state taking control over property on behalf of its citizens. The concept is not new, it’s been around for hundreds of years and has been updated in more recent times, and is now employed throughout the United States.

 

So think of it as a large, state-run lost and found. What’s interesting is that 1 in 10 Americans have unclaimed property. So the point is that one of you listening today has unclaimed property yourself. So hopefully by the end of this, you should look yourself up. You may have left behind an asset somewhere along the way. But don’t worry, your state is holding that money for you. There’s an estimated $50 Billion outstanding across the states.

 

8:04- Case Study, State of Delaware

As for Walter, he had to file a claim in the state of Delaware, and Delaware was arguably the worst abuser of unclaimed property statues last year. The state escheated over $500 million, it’s third largest source of revenue, and returned less than 4% of all property collected. So good luck to Walter in getting his stock back.

 

8:30- Common Causes of Escheatment

So, you might be wondering, what causes assets to be Escheated? Some of the most common, these 4 specifically listed here, are: 

1)When an individual dies and they don’t have a will or an heir, 

 

2)When an individual leaves or retires from an employer and leaves their financial accounts in the hands of that employer. So we encounter two things in this scenario. First, as time goes on the individual may lose track of the old accounts with the previous employer, and second, the individual doesn’t properly maintain these accounts by making sure there’s a beneficiary listed, and that the personal information listed on the profile is up to date,

 

3)When an individual moves without properly updating their address. So an example, same thing, if an individual changes jobs and moves to a new state, when moving it is common to update our address or our drivers license, but we may not think to contact our previous employer and update our address with them. So think of an example, when you move and you leave an employer, what if you received a profit-sharing check at the end of the year and they didn’t have your address as to where to mail that. And then lastly,

 

4)A common cause of assets to be escheated, is an individual having a dormant account, such as Walter. A dormant account is a period of time where there is no activity in an account. Think of an investment or brokerage account, and in most states, the dormant period is between 3-5 years. Good news: just logging into your account online counts as activity. 

 

10:15- Most Commonly Unclaimed Assets

TH: So here are the most commonly unclaimed assets: 1)Checking & Savings Accounts, 2) Investment Accounts, 3) Real Estate, 4) Uncashed Dividend Checks, 5)Belonging in Safety Deposit Boxes, 6) Payroll Checks, 7)Pension Fund Accounts, and 8) Federal and State Tax Returns.

 

What’s interesting, is that at one point, there was a safety deposit that was escheated to the state of Massechusets. It was told that they found guns and blueprints to a bank in that safety deposit box.

 

CL: What could that person have possibly been planning?

 

TH: I’ve no idea! But we do see some of these common assets being Escheated all the time. So after hearing the story of Walter and being locked in quarantine in early Spring, my husband Bruce and I decided to see if we had any property that was Escheated in any of the states that we had resided in. So, being a financial advisor, and my husband being financially astute, we typically have pretty good track of our accounts. 

 

However, we had unclaimed property. Bruce had a big check escheated from a company he worked at in his early 20s in the state of Indiana, where he lived for a short period of time during a work semester when he was in his undergrad program. So he filed a claim with the state of Indiana, and in just a few weeks, he received unclaimed property of $1,040. So we talked about the real value of the $1,040 that he received, and we wanted to know, what if he didn’t receive it? Or what if it just sat with the state of Indaian for 20 years, what would happen to that? 

 

So we assumed three different outcomes, one) that he didn’t claim it, it just stayed with the government, or state. You can see that during that time, those 20 years, it wouldn’t have accrued anything, he essentially just leant that money to the state of Indiana and didn’t charge interest. The second scenario is, what if he were to claim that money when he should have and saved it, maybe in a savings account. Well, we can assume that over the last 20 years, savings accounts averaged a 3% rate of return. So 20 years later he would have had $1800. And lastly, if he had invested it, if he had claimed it 20 years ago and invested it in a brokerage account, we can assume from his risk tolerance, that his average rate of return would be 10%, he’d have $6,300, which is why it is best to claim your property as soon as you can.

 

13:20- How do I avoid having unclaimed property?

CL: So how do I, or anyone else, any of our clients, avoid having unclaimed property?

 

TH: Great question. So first, last take a look at retirement plans, or financial accounts, and how to avoid the possibility of unclaimed property. Keep your email address, and phone numbers up to date with financial institutions, current and past employers. Use your financial institutions’ websites to check account balances. When possible, consolidate your financial accounts. Deposit checks that you receive, no matter how small they may be. If you get that $1 dividend check every once in a while that’s not being invested for some reason, you want to make sure you cash it, or deposit it. Respond to company notices regarding your assets. List and update your beneficiaries on your financial accounts. And, if you do have a safety deposit box, we suggest that you have the fee automatically debited from your checking or savings account.

 

14:25- How to avoid the possibility of unclaimed property?- Estate Planning

When it comes to estate planning, it’s part of the financial plan. We also want to make sure that we can avoid unclaimed property. As part of your estate, maybe if you own a home, making sure that your home is deeded properly. Have an estate plan, make sure that it’s up to date and stored somewhere prosperity. Make sure that the beneficiaries on all of your accounts are listed properly and up to date as well. And decide if a trust is necessary. Not sure what a trust is or if you need one? Contact you Verde Advisor and collaborate with an estate planning attorney and they can see if that’s necessary. And possibly designate an executor or a responsible party to manage your assets.

 

15:15- How to avoid the possibility of unclaimed property?- Tax Planning

And when it involves your tax plan, on how to avoid the possibility of unclaimed property, we suggest that you consider selecting electronic deposits for state and federal tax returns. And make sure that your address is up to date when you move. Don’t leave people guessing, make sure to update your address with financial, professional, and other organizations directly after you move. And if you think we’ve missed something, or are not sure if you’ve missed one, ask us for a check list, we have it readily available for you.

 

15:51- How to find out if you have unclaimed funds

CL: So this is really good information, how would i search for myself or family members?

 

TH: So we’ve provided a list of specific sites that you can go to, but if you do have assets out in the universe, we want to help you claim them, and we’ll show you where to get started. [Resource Links Listed Below]

 

17:30: Will there be tax consequences if I find some assets?

 

TH: Great question, it depends on the asset, and if it’s income, you do have to report it as income.

 

18:30: Do I have to restate my income for a year the asset of property was earned, for example a check from 2018?

 

TH: It is best to contact your accountant or CPA, they may need to do an amendment depending on your income, depending on what the dollar amount was.

Links to Escheatment Resources-

 

IRS TIPS:

https://www.usa.gov/unclaimed-money

 

National Association of Unclaimed Property Administrators:

https://unclaimed.org/search-for-your-unclaimed-

property-its-free/

 

Michigan- Unclaimed Funds Site:

https://unclaimedproperty.michigan.gov/

 

Florida- Unclaimed Funds Site:

https://www.fltreasurehunt.gov/

 

Ohio- Unclaimed Funds Site:

http://treasurer.ohio.gov/unclaimedfunds

 

California- Unclaimed Funds Site:

https://www.sco.ca.gov/

 

Illinois- Unclaimed Funds Site:

https://icash.illinoistreasurer.gov/

 

Indiana- Unclaimed Funds Site:

https://www.indianaunclaimed.gov/

 

Verde Capital Management, Inc. is a federally registered investment adviser. The information, statements and opinions expressed in this material are provided for general information only, are based on data we believe to be accurate at the time of writing, and are subject to change without notice. This material does not take into account your particular investment objectives, financial situation or needs, is not intended as a recommendation to purchase or sell any security, and is not intended as individual or specific advice. Investing involves risk and possible loss of principal capital. Diversification does not ensure a profit or protect against a loss. Past performance is not indicative of future returns. Advisory services are only offered to clients or prospective clients where Verde Capital Management, Inc.  and its representatives are properly licensed or exempt from licensure. No advice may be rendered by Verde Capital Management, Inc. unless a client service agreement is in place.

Speak With An Advisor

Speak with an advisor

Related Posts

Fireside Chat – View of the Market Q2 2022