“Federated will defend this case vigorously because it has complied with the law” as well as its own procedures, said Federated spokesman Ed Costello in a statement.
States More Aggressive Since Financial Crisis
Turner’s situation highlights some of the issues with states going after unclaimed property.
For one thing, industry observers say states have gotten more aggressive in looking for abandoned property—ever since the financial crisis dried up tax revenue.
Lost assets “are supposed to be held in trust by states, in perpetuity, but are often used for the general fund,” said Ferdinand Hogroian, legislative counsel at the Council On State Taxation, a group representing more than 600 multistate corporations.
If property is claimed by the owner, a state will return the liquidated amount. If not, the state keeps it.
With investment accounts, assets may have been sold by a state at less than current value. Plus, there may be taxes and penalties on gains and IRA distributions.
Dormancy Periods Shrink
One way states have gotten more aggressive is by shortening dormancy periods. This is the length of time that an owner must remain inactive or unreachable by mail before property must be delivered to the state. (Usually, brokerage firms send letters to inactive accounts asking for a reply before turning the assets over to a state.)
The Securities Industry and Financial Markets Association (SIFMA) and other industry groups say that dormancy periods have been shortened to three to five years from what had been seven years in most states.