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IL Estate Planning Blog

Tuesday, September 6, 2016

Investors Beware!

http:/Taken From May 2016 AARP Bulletin:

 States are quick to declare financial property "abandoned" and then grab it By Eileen Ambrose

 

If you get a letter from your brokerage mutual fund company or bank saying it hasn't heard from you in a while, don't ignore it.  The financial institution might be trying to prevent your investments from being turned over to your state government.  States have become quicker to declare investments "abandoned" when owners lose touch with their financial firm.  Once investments are seized, states try to find the owners.  If that fails, shares generally are sold and the proceeds used by the state until the owners - or their heirs - claim the money. 

  

States held $41.7 billion in unclaimed financial assets - such as bank accounts, uncashed paychecks and securities - as of 2011.  This may surprise many set-it-and-forget-it investors, who ignore portfolios but count on the money being there for them later.  When states sell securities, investors can lose years of dividends and capital appreciation.

 

This came as a painful lesson to one New Jersey student, who received $500 worth of stock in 1995.  By 2014, when he finished college, the value of his shares had grown to $8,250.  He hoped to sell the stock and buy a car; instead he learned that the state of New Jersey had sold his shares eight years earlier for $900.

 

State laws regarding reimbursements vary.  New York tries to make owners whole, giving them the current value of the sold securities plus any dividend or stock splits.  New Jersey pays the proceeds from the sale plus interest.  In Indiana, any assets unclaimed after 25 years become the property of the state.

 

Traditionally, investments were considered abandoned if mailed statements were returned as undeliverable and owners couldn't be found.  Since the 2008 financial crisis, several states have made it easier to claim your financial assets by adopting a new standard.  Assets now may be determined abandoned if the investor hasn't made contact with the institution for three or five years.  States used to wait seven years.

 

Industry groups say states don't give enough time.  "I have friends I haven't spoken to in four years, and they are still my friends," says Will Leahey, a vice president with the Securities Industry and Financial Markets Association.  Critics say cash-strapped states use unclaimed property to meet budget gaps.  What you need to know:

  • Pensions and 401(k)s are excluded from unclaimed property laws.  IRAs aren't, but they are considered abandoned if the owner has had no contact and fails to take the required distributions after age 70 1/2.
  • Contact your mutual fund or investment firm at least once every three years.  Automatically reinvesting dividends doesn't count as contact in some states.
  • Respond to letters from your investment firm.  If you worry it's a scam, call the firm at the number listed on your last statement.
  • Go to Unclaimed.org and Missingmoney.com to search for seized property.  To find uncashed savings bonds, search treasuryhunt.gov and to recover deposits from failed banks, go to www5.fdic.gov/funds.  In Illinois, go to https://Icash.illinois.gov.

 

 

 


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With two offices in Oak Lawn and Oak Brook, Stephen M. Sutera assists clients throughout Cook County, DuPage County and Will County IL including Chicago, Hometown, Barrington, Burbank, Burr Ridge, Chicago Ridge, Darien, Downers Grove, Evergreen Park, Geneva, Worth, Bridgeview, Palos Park, Palos Hills, Palos Heights, Hickory Hills, Midlothian, Willow Springs, Oak Forest, Orland Park, La Grange, Brookfield, Berwyn, Tinley Park, Hinsdale, Villa Park, Clarendon Hills, Westchester, Westmont, Lombard, Elmhurst, Western Springs, Berkeley, Downers Grove, Fox Valley, Glen Ellyn, Willowbrook, Aurora, Addison, Lisle, Forest Park, Bensenville, Wheaton, River Forest, Itasca, Shorewood, Frankfort, Mokena, Naperville, Crest Hill, Homer Glen, New Lenox, Bollingbrook, Schaumburg, Channahon and Woodridge.



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