What Is a Dormant Account?

A dormant account is any financial account that has had no activity, such as deposits, withdrawals, or transfers, for a specified period of time. Interest does not count as a posted activity because it is performed by the financial institution, not the account holder.

If your account becomes inactive, your financial institution will be forced to steal or send the remaining funds to the state. The state holds your money indefinitely until you or a beneficiary claims it.

Here's what you need to know about dormant accounts and what to do if your financial institution sends the remaining funds to the state.

Definition and examples of an inactive account

Any financial account that has not been active for a long time, usually five years, without registering interest, can be marked as inactive.

Some common examples of accounts that can be marked as inactive include:

Checking accounts
keeping accounts
money market accounts
Certificates of Deposit (CD)
investment accounts

But inactive accounts can also include other types of "ownership", such as:

Safes
Undrawn checks and money orders
life insurance payments
Annuity contracts
Taxes devolution

The amount of time it takes for an account to be inactive varies by status and type of account, but the most common amount of time is three to five years.

In California, Connecticut, and Illinois, most bank accounts are inactive after three years. In Delaware, Georgia, and Wisconsin, it's five years. In most states, wages and salaries become inactive at 12 months.

How does an inactive account work?

There is a gradual process that takes place when an account becomes inactive. For bank accounts, this is usually the case, although the exact terms vary:

You do not make deposits, withdrawals, or transfers to your financial account for 12 months.

Your financial institution marks your account as inactive and potentially begins to charge you a monthly inactivity fee.

You have not yet posted any activity on your account or transacted for another 24 months.

Your financial institution then changes your account status from "inactive" to "inactive." Close your account and send the remaining funds to the state.

Depending on your state, these funds will be held by the Treasury Office or the Department of Revenue.

Throughout the entire process, your financial institution has a legal obligation to attempt to contact you, which is one of the reasons why it is important to keep your contact information up to date. If they can't reach you, they will likely send you a final notice before turning everything over to your state.

How to claim funds transferred from an inactive account

You can follow these steps to see if you have transferred funds from an inactive account:

Search for unclaimed funds using a database such as the National Association of Unclaimed Property Managers or MissingMoney.com.

Follow the instructions to claim the funds you find.

Submit the necessary documentation to verify your entitlement to the funds. This could include your Social Security card, a copy of your driver's license, or proof of residency.

Pay the processing fees if necessary.

Wait for the state to send you your funds.

Why are the accounts inactive?

Accounts are "dormant" simply because the account holder has not made any deposits, withdrawals or transfers in a certain period of time.

This can happen if someone loses their job or even dies, for example. The accounts are then marked inactive because they are inactive.

After an account has been inactive for a specified period, a financial institution is legally obligated to transfer the remaining funds to the state.

However, the state doesn't just leave this money to collect dust. He often puts it to work financing roads, schools, prisons, and other public projects. The funds are recorded as debts on the state balance sheet so that you can legitimately return the money to the owner or beneficiary if they appear.

How to prevent your account from becoming inactive

The key to avoiding a dormant account is to let your financial institution know that you have not forgotten it. Some simple ways to do this periodically are:

Make a deposit, withdrawal or account transfer, even if it only costs $ 5
update your contact information
Login to the online account portal
Contact your institution by phone, email, live chat, or in person at an agency.

We hope you enjoy watching this video about What Is a Dormant Account

Source: OFW AKO

 

Did you find this post useful or inspiring? Save THIS PIN to your Finances Board on Pinterest!

Ok, That is all for now…
If you enjoyed this article please, Share and Like it. Thanks.
See you in the next post, Have a Wonderful Day!