This Trend Sweeping States Makes Claiming Assets More Timely Than Ever
- Author: Michael Bordonada
- Posted: 2023-02-20
Many people have some sort of unclaimed asset. Whether it's a few dollars owed in an income tax refund or hundreds of thousands from a life insurance policy, many people are surprised to find that they're owed income from multiple sources. Unless you have attorneys working for you who actively seek this out, you won't find them without putting in work yourself.
A worrying trend is beginning to become popular in states where raising income tax would be political suicide for current politicians. It directly impacts your ability to claim your assets.
Unclaimed Assets? Not for Much Longer
Colorado was one of the first states to pass a bill to this tune in 2019. Since the majority of the state's $30 billion in unclaimed assets are just left to rot, state lawmakers decided to do something about it. They put a cap on how long people have to find their assets; the cap is variable and depends on the value of the asset.
So, if you don't claim your asset, the state takes the money. It's often used to build infrastructure that they felt they couldn't increase taxes to do. Unfortunately, this trend is primarily in states that are considered "high tax", such as New York and California. These states could face mass exoduses if they aren't careful about curbing extra taxes, so they'll tap any possible funding sources before taxing citizens more.
However, this is effectively theft of your own assets! The biggest risk used to be that you'd lose the potential to invest property and money over the years if you took too long to claim them. Now, you risk not being able to get your own assets back at all!
Combating This Issue
First, you'll need to determine whether states where you've lived have passed laws like this. Many states have not, and if this is the case, you don't need to take further action. However, if for any period of time you lived in a state that did pass these laws or will pass these laws soon, it's time to get to work.
Look at each state's specific database, and have a time scheduled every month or so when you only look into unclaimed assets. There are no federal guidelines these states must follow, and some of them continually shrink the timeline to claim assets. Though the legality and morality of doing this is debatable, many states seem to have no issue doing it.
Is This Trend Legal?
This is uncharted territory. While states like Colorado can enjoy improvements to infrastructure immediately due to "free" funds, what they're doing could also be seen as theft. For example, if someone is deployed in the military overseas and has no Internet access and they are owed something that "disappears" before they come back, how could they have reasonably been expected to claim it?
That's why some states have exemptions for people in certain situations. Others simply allow the money to be spent and will pay you back upon demand. The key here is that right now, states' rights dominate the issue. Like most similar trends, there's a strong likelihood that this practice will be prohibited or regulated by the federal government at some point.
However, in the meantime, you're going to have to do the heavy lifting yourself to ensure that your potential money doesn't go into fixing a pothole on a California back road instead of your own pockets.
Why Is This Happening Now?
You may be wondering why these assets are just now being scooped up by states and being used. The answer is that many states are struggling to keep up with expenses they incur. States like Tennessee and Texas have constitutions that prohibit income taxes, leaving them with limited options. Low-tax policies have been favored in the United States since the 1940s, but there still needs to be some way to pay for infrastructure often referred to as "crumbling" or "subpar" when compared to other developed countries.
It remains to be seen if this practice is legally sustainable. In the meantime, it's crucial to be more vigilant than ever before when checking databases for unclaimed assets. Regardless of whether it's legal or not, it's clear that the state did absolutely nothing to earn what is rightfully yours.