Managing compliance with unclaimed property has become challenging due to the constantly changing legislative environment. A recent obligation gaining traction among states, which companies must be mindful of, is the requirement to conduct outreach to owners before their property is considered abandoned. This obligation, referred to as “pre-presumption outreach,” stems from the enactment of the Revised Uniform Unclaimed Property Act of 2016 (“RUUPA”). According to RUUPA, holders are mandated to reach out to specific property owners if there has been no owner-generated activity for two years before their property is presumed abandoned.
RUUPA’s Pre-Presumption Outreach Requirements
Generally, RUUPA language reads as follows:
If the holder does not send communications to the apparent owner of an account by first-class United States mail, the holder shall attempt to confirm the apparent owner’s interest in the property by sending the apparent owner an electronic-mail communication not later than two years after the apparent owner’s last indication of interest in the property. However, the holder promptly shall attempt to contact the apparent owner by first-class United States mail if:
- the holder does not have information needed to send the apparent owner an electronic mail communication or the holder believes that the apparent owner’s electronic mail address in the holder’s records is not valid;
- the holder receives notification that the electronic-mail communication was not received; or
- the apparent owner does not respond to the electronic-mail communication not later than 30 days after the communication was sent.
Consequently, in states where this language has been adopted, there is typically a mandate for holders to provide advance notice via email before the escheatment process, in addition to the required due diligence. This obligation is specific to property owners who receive communications from the holder through email. The pre-escheat notice becomes mandatory after two years of inactivity, regardless of the dormancy period applicable to the property type. It is essential to track the period of inactivity separately from the dormancy period. A follow up letter by U.S. mail must be sent if one of the three conditions above applies.
Per RUUPA, the pre-presumption outreach requirement applies to tax-deferred retirement accounts, custodial accounts for minors and securities-related accounts. However, since the finalization of RUUPA, states selectively adopt and modify portions of RUUPA to align with their preferences. This trend is also evident in the pre-presumption outreach provision.
In practice, states seldom adopt the exact RUUPA provision, opting instead to tailor it to their specific needs. After examining all enacted pre-presumption outreach provisions, we can categorize the differences into three main areas: the types of property subject to the pre-presumption outreach obligation, the conditions triggering the requirement for pre-presumption outreach, and the mandate to follow up with outreach via U.S. Mail.
Property types requiring pre-presumption outreach by all holders
In implementing laws inspired by RUUPA, states have not necessarily applied the pre-presumption requirement to the same property types outlined in RUUPA. Instead, many states have expanded the scope of the requirement to encompass additional property types. Specifically, states have included the requirement for some combination of bank accounts, securities accounts, tax-deferred retirement accounts, fiduciary accounts and custodial accounts.
Requirements leading to pre-presumption outreach obligation
According to RUUPA, if an owner’s account is designated for electronic mail and they do not receive communications via first-class mail from the holder, the holder is obligated to attempt confirmation of the owner’s interest in the property by sending an email no later than two years after the owner’s last indication of interest. However, states have also modified this aspect of the provision. some states requiring the outreach to owners that do not receive communications from the holder by first class mail on at least an annual basis. Other states have extended the timeframe for conducting outreach from two to three years.
Requirements to follow up with U.S. mail
The requirements as to when holders must follow up the pre-presumption emails with first class mail have also been altered by several states. The requirements for follow up with a U.S. mailing include any combination of the following:
- The holder receives notification that the email was not received.
- The owner does not respond within 30 days after the email was sent.
- The holder does not have enough information to send an email.
- The holder believes the email address to be invalid.
Similar to all unclaimed property requirements, keeping track of the differing pre-presumption outreach requirements and the changes thereto is a daunting task. However, the importance of understanding the state requirements cannot be underestimated as the outcome of the pre-presumption outreach is a factor in determining the start of the dormancy clock. If the holder receives a response to the outreach, the holder should document and update the date of last contact and the account is preserved from escheatment.
Take Action
Discover the top red flags that trigger an unclaimed property audit on our blog.
