State changes abandoned property notification rules

DOVER — In some circles of the business and legal communities, Delaware is famous — or perhaps infamous — for its unclaimed property laws.

Often described as aggressive, the state’s abandoned property program has long been a major moneymaker, thanks in large part to Delaware’s status as perhaps the premier state for incorporation.

More than 1 million companies, including two-thirds of the Fortune 500, are incorporated here, and a U.S. Supreme Court ruling that property defaults to the state of incorporation when the owner’s address is not known means Delaware benefits from abandoned assets.

In the fiscal year ended June 30, liquidated unclaimed assets — bank accounts, paychecks, stocks and other financial accounts — brought in $554 million for Delaware. For comparison, the state’s budget last year totaled $4.08 billion.

But even as the state’s laws have resulted in a windfall of revenue, they’ve brought heat down on Delaware.

In recent years, Delaware has faced lawsuits from other states, as well as companies. The Council On State Taxation in a 2013 report gave the First State a D- grade for its laws relating to abandoned assets, tied for worst among states.

To address those issues, lawmakers unanimously passed a bill aimed at making the laws clearer and smoother earlier this year. The measure was based on recommendations from the Uniform Laws Commission Drafting Committee to Revise the Uniform Unclaimed Property Act.

It was signed into law by Gov. John Carney on Feb. 2, making it one of the first bills the governor, a former state secretary of finance, officially approved.

Among the changes made by the bill are notification requirements.

The state now must inform abandoned property owners it has their assets by mailing a notice to each owner’s known address and printing an ad in a newspaper twice a year. The ad will inform individuals they can visit a website to see if Delaware is in possession of any of their property and will also provide a phone number for customer service.

Previously, Delaware published in newspapers a booklet of names hundreds of pages thick. The listing was produced every October and included with copies of the Delaware State News and the News Journal.

According to the main sponsor of the bill, the changes were overdue.

“Delaware is in a unique position when it comes to unclaimed property, and over the years we tinkered with it here and changed it here and there but we never really sat down and kind of rewrote the law so that it flowed better and there was harmony there,” Sen. Bryan Townsend, D-Newark, said.

The provisions for banks have been changed as well. Whereas banks previously were compelled to publish once a year in a newspaper a list of people who had at least $25 in unclaimed assets, now they must mail notices to the last known addresses of owners for assets worth at least $50.

The Department of Finance said there were 20,018 claims paid in 2016, with an increase in weekly claims immediately following the October publication.

Sen. Townsend believes the new notification requirements will make more people aware the state has their property.

But MDDC Press Association Executive Director Rebecca Snyder disagrees.

“It just feels like the real loser in this effort to kind of modernize this escheat code is the public because they’re not getting the notice that they’re used to,” she said.

The previous list of names included everyone who had property worth at least $10 in the state’s possession, whereas Delaware is now required to mail letters only to people who have items that total $50 or more.

If a bank is unable to reach somebody, the state probably won’t have better luck, Ms. Snyder said.

According to Mike Houghton, a lawyer who co-chairs the Uniform Laws Commission Drafting Committee to Revise the Uniform Unclaimed Property Act, there is a trend toward digitalization. States are embracing the internet to inform owners of unclaimed assets and moving away from newspaper notices, he said.

Sen. Townsend noted the new law does not prevent the state from running a list of names in a newspaper but simply does not require it.

“It gives the flexibility where if that’s the best way to reunite owners with their property then we should do that,” he said.

Reach staff writer Matt Bittle at mbittle@newszap.com

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