State laws generally require banks, brokers and other institutions to turn assets over to your last known state of residence at the end of the dormancy period. The dormancy "clock" may start ticking when either mail from your financial institution is returned as undeliverable or when you fail to contact your financial institution within the dormancy period. Now, the majority of states have adopted a three-year or five-year dormancy period. A few years ago, five-year and even seven-year dormancy periods were common. This is the number of years you have to take a required action (such as cashing a dividend check or responding to a corporate action).
In recent years, some states have shortened their dormancy periods. If financial institutions can't get in touch with you within a certain time-frame-often called a "dormancy period"- they may be required to turn over the money in your accounts to the state. This can happen if you don't pay attention to correspondence from your broker, investment advisor, mutual fund, bank or 401(k) administrator, or if you don't notify these institutions regarding changes to your address and contact information. But those same laws can cause headaches for consumers who don't stay on top of their accounts.
The purpose of unclaimed property laws is to protect consumers by ensuring money owed to them can be returned to them or any heirs. State unclaimed property administrators work hard to help consumers avoid that outcome-but you have an important role to play, too. If you have financial accounts that go dormant and your financial institution can't reach you, your assets might inadvertently end up in your state's lost property fund. Sometimes you can't avoid handing over money to the government, like when pay your federal and state taxes.