This entry contains information applicable to United States law only. The power of a state to acquire title to property for which there is no owner.
The most common reason that an escheat takes place is that an individual dies intestate, without a valid will indicating who is to inherit his or her property, and without relatives who are legally entitled to inherit in the absence of a will. A state legislature has the authority to enact an escheat statute.
In feudal England, escheat was a privilege exclusively given to the kings. The policy then was to preserve the wealth of noble families by permitting one individual to inherit an entire estate. There was no right to write a will leaving that property to several heirs because that would have the effect of breaking up the estate. In addition, the law designated certain heirs who were in line to inherit the estate. If there was no living person of a designated class to inherit, the king took the property by escheat.
Historically, reasons existed for escheat apart from the absence of heirs to inherit a decedent's property. When corporations were subject to strict regulation, it was unlawful for a corporation to own property in any way not permitted by its state-granted charter. Any property beyond that needed by the corporation for the operation of its business, or in excess of the amount designated in its charter or held for a period of time beyond that which was permitted, was subject to escheat.
Certain states mandated escheat of property belonging to religious societies that either promoted polygamy or neglected to incorporate as required by law. Additionally, where public lands were provided for settlers, statutes frequently made provisions for escheat when one individual took possession of more than the permitted acreage or did not properly cultivate the homestead. Property that still might be subject to escheat is that belonging to persons who die in a state institution, such as a prison, mental hospital, or veteran's home.
Dissimilarities
Escheat is distinguishable from forfeiture since, in spite of the fact that the effect is identical under some statutes, forfeiture can be for any type of property interest, including possession, the right to inherit, or the right of reversion if a certain condition was violated by the present owners. Escheat means total relinquishment of ownership. Whereas a forfeiture operates against the individual who has an interest in the forfeited property, an escheat takes place due to the lack of any person with a valid interest in the property.
Forfeiture is often used as a penalty for an illegal act, while escheat is not currently linked to any illegality.
Escheat is also distinguishable from reversion, although such distinction has not always been made. A reversion arises only where some remnant of ownership remains in the individual claiming a right to get back the land. The right of reversion can be asserted when some specific condition arises to trigger the right to reclaim. An escheat can occur even though the owner's title is in fee simple — that is, complete and unconditional.
Succession is the passing of a decedent's property to his or her heirs. Escheat is not treated in law like succession; it is completely separate from succession.
The law does not favor escheat. Courts actively seek to avoid it and, as a result, have abandoned most of the grounds for escheat that were recognized centuries ago in England.
Federal law proscribes corruption of blood and forfeiture of an entire estate as penalties for convicted criminals.
Property Subject to Escheat
Ordinarily, the property subject to escheat is all the property within the state belonging to the original owner upon his or her death. Although initially the doctrine was applicable solely to real property, it presently extends to personal property, including such intangibles as bank accounts and shares of stock.
A state cannot appropriate property by escheat merely because that property is within its boundaries. Laws in each state prescribe directives for deciding when a deceased person's property is subject to escheat.
Certain other types of property can be the subject of escheat for lack of a known owner. The determination is contingent upon state law.
Certain statutes specify that the property of charitable or religious institutions escheats upon dissolution if its donors have not retained the right to recover it when it is no longer used for religious or charitable objectives.
At common law, any property that belonged to aliens was subject to escheat. Laws preserving this rule are considered constitutional.
Unclaimed or abandoned property escheats to the state under some statutes. However, the state cannot merely declare property abandoned and appropriate it. Such laws must function within constitutional limits by observing the requirements imposed by due process. The state is required to adopt a routine procedure for notifying the public and must provide potential claimants an opportunity to argue that the property might belong to them. Without declaring that certain abandoned property has been escheated, the state may lawfully possess the property and hold it for a period of time so that claims can be asserted. A state is not mandated to take over unclaimed property but may choose to exercise the power to escheat only when the value of the property does not exceed the expense of legal proceedings.
Items subject to escheat under various statutes include abandoned bank accounts, deposits left with utility companies, stock dividends whose owners cannot be found; unpaid wages; unclaimed legacies from the estate of a deceased relative; insurance money to unknown beneficiaries; and unclaimed money retained by employers or public officials.
Procedure
Escheat statutes prescribe a procedure for location of the rightful owner. If such effort is unsuccessful the property should be applied for the benefit of the public rather than merely the individual who is holding it when it becomes apparent that no owner can be found.
In some states title to some property automatically passes to the state when it escheats for lack of a proper claimant. In other states, a certain period of time must elapse prior to the commencement of escheat proceedings. This does not bar a claimant from stating his or her claim before completion of the escheat proceedings. Some laws require claimants to assert their rights within a period of time or forfeit them. Often, states mandate that individuals administering estates notify the state government of the existence of property that might be subject to escheat. If the state is not notified when it is required, the time within which the state must start an escheat action is extended accordingly.
The primary burden of proving that there is no proper individual entitled to own the property in question vests in the state, and the general rules regarding the admissibility of evidence are applicable. Rules of presumption, such as the common-law presumption of death after a seven-year disappearance, can be used to support the case of the state. After the state has proved a legally sufficient case, any individual claiming a right to the property has an opportunity to go forward and argue against the evidence submitted by the state.
Some states offer money to informers who notify the state of property that might be subject to escheat. Informers might be required to provide evidence and pursue the case to a conclusion before they will be entitled to a fee. Other states provide compensation for an escheater, a person appointed by the court to manage the claim of the state for escheat. An escheater is entitled to be paid a reasonable amount even if he or she does not succeed in recovering the property for the state.
Property that is either bound over or paid into court for any reason is meant to be held for safekeeping and, therefore, is only in the possession of the court. Escheated property, conversely, is possessed and owned by the state, and the state takes title of such property subject to all other liens, mortgages, or encumbrances.
Federal law provides that the property of veterans who die without a will or heirs escheats to the United States in certain cases, but ordinarily escheated property goes to the state in which it is situated. Even land that was granted to its owner by the federal government becomes the property of the state if it is subject to escheat. A state law may give escheated property to a county or town, but this is rare.
