The Unclaimed Account

The problem

When a bank account goes quiet, a paycheque is never cashed, a utility deposit is never refunded or a life insurance policy is never claimed, the money does not vanish. After a few years the holder is required by law to hand it to the state, which keeps it, in theory, until the owner turns up. The National Association of Unclaimed Property Administrators puts the total held by states at about $70 billion, belonging to an estimated 33 million people, roughly one in seven Americans. The federal government holds another $32 billion in matured savings bonds that were never redeemed. In fiscal 2024, states returned a record $4.49 billion, which is a good year and about six percent of the pile.

What the states do with the rest is the part the owners are not told. Most deposit unclaimed property in the general fund, reserve a fraction for expected claims, and spend the difference. Delaware, the legal home of most American corporations and therefore the recipient of their orphaned cheques, has made unclaimed property its third-largest source of revenue, about $514 million in a recent year, more than 13 percent of its budget, and it paid $102 million to settle a suit by other states over how aggressively it collected. California holds about $15 billion. A state that funds itself on money it is holding for other people has an interest in not finding them, and the results show it.

The absurd part is that finding them is not hard. The state has a name, often a Social Security number, and a last address. The federal government has a current address for nearly every one of those people, on a tax return, a Social Security record or a Medicare file. № 001 creates a citizenship registry and № 051 puts a card on it. A country that can pay a dividend to every citizen can return a citizen's own money without being asked.

The proposal

The Unclaimed Account: a federal matching service that runs every state's unclaimed property file and the Treasury's unredeemed bonds against the citizen registry and federal records, and pays the owner automatically, with no claim, no form and no fee. Property that finds no owner after ten years of matching is deposited in the American Permanent Fund as principal, with a perpetual right to reclaim. States keep custody and their costs; they lose the float.

How it would work

1. Match, then pay. Each year, every state's unclaimed property file is matched against the citizen registry, the IRS master file and the Social Security record, by an office at the Treasury under the privacy rules of № 051: the match returns a payment address and nothing else. Where the match is confident, the state pays the owner directly, as several states already do for small sums. Where it is not, the owner is notified at the matched address and paid on a reply.

1. No claim, no fee, no finder. Today a claim can take months and an industry of "finders" charges owners a share to file it. Under the rule the burden of finding is on the holder, which has the record, and no fee may be charged to an owner for the return of their own money.

1. The bonds too. The Treasury already knows the Social Security number on most of its $32 billion in matured, unredeemed savings bonds. It matches them and pays, on the same schedule, and reports what it has returned.

1. The float ends. A state may hold unclaimed property in a separate trust and earn interest on it for the owner, but may not book it as revenue or spend it in the general fund. Delaware's budget is the reason this rule is needed and the reason it will be fought. The proposal phases the change over ten years so that no state's budget falls off a cliff.

1. Ownerless, to everyone. Property that has been through ten annual matches with no owner found, with the owner's estate notified where one exists, is deposited in the fund as principal, in the name of no one and therefore of everyone. The right to reclaim never expires: an owner who appears in year thirty is paid from the fund with interest, and the fund has lost nothing but the return on money that was never its own.

1. Published. Each state's file size, match rate, return rate and deposit to the fund, on the Shareholder's Report of № 050. A state with a large file and a low match rate will be asked, in public, why.

The numbers

What is waiting. $70 billion in the states, $32 billion at the Treasury: about $100 billion, or about $300 per citizen if it were divided equally, which it will not be, because most of it belongs to specific people who will get it.

What matching returns. States that have adopted automatic payment for confident matches report returning several times what the claim system did. If federal matching lifts the annual return rate from six percent to a third of the file, the first years pay out on the order of $20 to $30 billion a year to the people it belongs to, until the backlog is cleared and the flow settles to what is newly abandoned each year.

What is truly ownerless. Some share of the file belongs to the dead without heirs, to dissolved companies, and to people who can never be found. If that share is a fifth, the fund receives, over the ten-year phase-in, on the order of $15 to $20 billion of principal, and then a steady trickle. It is not the fund's largest deposit. It is its most honest: money that belongs to no one, kept for everyone, with a standing offer to give it back.

What the states lose. Delaware's $514 million, and the equivalent elsewhere, phased out over ten years. It is real revenue and the state will have to replace it with a tax its own citizens can see, which is the only kind a state should run on.

The honest objections

"This is a federal takeover of state property law." The states keep custody, keep their statutes, keep their offices and keep their costs. What the federal government adds is the one thing only it has, a current address for the owner, and the one thing the states have shown they will not do on their own, which is look. A state that would rather not use the match may decline it and continue as now, except that it may no longer spend what it holds.

"Matching Social Security numbers against state files is a privacy disaster." The match runs under № 051's rule: it returns a yes and an address, it records nothing about where the query came from, and it may be used for nothing but the return of money. The current system, in which forty states publish owners' names and last addresses on public websites for anyone to search, is the privacy disaster. The proposal ends it.

"Depositing ownerless money in the fund is just a different government keeping it." With one difference that matters: a perpetual right to reclaim, at interest, that no state offers, and a deposit made in the name of every citizen rather than the general fund of one state. Money with no owner belongs, if it belongs to anyone, to everyone. The fund is the only institution that pays everyone.

"States will lose a revenue stream they cannot replace." They will lose a revenue stream they should never have had, over ten years, and replace it with taxes their voters can see. Delaware is a wealthy state with a corporate franchise tax it can adjust. The other states, for which unclaimed property is about half a percent of the budget, will barely notice.

"The money is small compared to the fund's other sources." It is, and this catalog includes it anyway, because a fund that will not return $100 billion of other people's money before it asks for anything of its own has no standing to ask.

Sources

• National Association of Unclaimed Property Administrators, Fiscal Year 2024 Annual Report, October 2024, total holdings, owners, and amounts returned, unclaimed.org
• U.S. Department of the Treasury, Bureau of the Fiscal Service, matured unredeemed savings bonds, treasurydirect.gov
• Delaware Department of Finance, revenue forecasts and unclaimed property collections; WHYY, "States, including Delaware, go after unclaimed property, use it to patch budgets," and reporting on the $102 million settlement with other states
• California State Controller, unclaimed property fund balance
• Council On State Taxation, The Best and Worst of State Unclaimed Property Laws, on state practices and general-fund treatment
• Proposals № 001 (The American Dividend); № 050 (The Shareholder's Report); № 051 (The Citizen Card)