Forbes recently ran a story about "escheat laws" — originally created to protect consumers by having the state take control of abandoned assets, recent changes to these laws are increasingly turning them against consumers by allowing the government to stick its hands into assets that haven't been abandoned at all.
The primary issue is the rapidly declining time period before accounts are "escheated" by the state. It used to be that accounts (which can include bank/broker accounts, unclaimed life insurance policies, even neglected safe-deposit box contents) had to be untouched for decades to qualify for this treatment. But in recent years states have been moving more aggressively, with 27 states (plus DC) now allowing these laws to kick in after just three years! (See the map in the article to see if your state is among them.)
The silver lining is that you can get these assets back from the state if they grab something of yours. But it's a hassle and in some cases you'll face significant tax consequences. For example, a brokerage account may be liquidated, creating capital gains issues. Worse yet, the article mentions IRA accounts being escheated and taken out of their tax-deferred wrapper, making the full balance taxable immediately.
Three years isn't that long to let an account sit idle, particularly if it's a bank account invested in something like CDs that automatically roll forward into new ones. And even if this is never likely to be an issue for you because you open all the mail you get from financial institutions (they normally mail you a notice before an account gets the escheat treatment), it could come up if you're ever helping administer someone's estate or just helping a relative with their financial matters later in life.
Here's Forbes' advice on how to protect yourself from these increasingly predatory laws:
Consolidate your accounts. Every few years contact the bank to say “hi” to your CD or IRA. Check your balance online—a growing number of states, including Pennsylvania, consider this evidence your account is active. Cash checks as soon as possible.
And do open your mail, even what looks like generic notices, since financial institutions must generally inform you in writing before escheating your account. If despite these efforts your property escheats, you may have to file a notarized claim with the state to get it back.
Meanwhile, search for already escheated assets in your name at www.naupa.org, a website maintained by the National Association for Unclaimed Property Administrators. Who knows? You might actually have forgotten an account.