Owning stocks requires more than just buying and holding them. If you’re not actively engaging with your investment, your state might consider it abandoned. This is not linked to death or relocation, but rather, inactivity.
Changes in Unclaimed-Property Laws
States have been modifying unclaimed-property laws to redefine when securities become abandoned. Previously, many states waited seven years to declare stocks abandoned; now, more than half use a three-year threshold. The criteria have shifted from ‘lost’, such as undeliverable mail, to ‘inactive’ accounts. This move is termed as ‘unfortunate’ by Computershare, a major stock transfer agent.
The Investor’s Challenge
Investors dedicated to long-term holding by buying and maintaining shares might face unexpected issues. Simply receiving statements or having dividends deposited may not qualify as activity in some states. If marked as dormant, accounts can be transferred to the state and the shares potentially sold.
An Example Scenario
Consider Jan Peters, a German citizen with Amazon shares. His shares were taken by California after being labeled as abandoned due to an address error. California sold the shares for $1.6 million, but their value was estimated to reach $4.2 million by 2025. Peters contested this, but the U.S. Supreme Court declined to review his case.
State Motives and Financial Impact
States claim these laws protect consumers, acting as a centralized lost-and-found. However, states also benefit financially by using the cash from unclaimed properties. For example, Texas projected a $72 million gain by shortening dormancy periods. New Jersey expected revenue to rise from $90 million to $309 million in one year after similar changes.
Challenges in the System
Transfer agents and brokers must navigate various state laws, leading to standardized, cost-effective procedures. However, these systems sometimes fail. The SEC identified issues where automatic processes mismanaged or failed to reach out to investors accurately. In one instance, Bank of New York’s errors resulted in assets worth $11.5 million going to states as unclaimed property.
Ongoing Discussions and Reforms
The large number of misplaced securities, such as the 51,320 accounts reported by Computershare in 2024, illustrates the scale of this issue. Massachusetts Senator Elizabeth Warren has questioned why states favor inactivity standards over returned mail. Meanwhile, Florida’s 2026 reforms have pushed for more reasonable triggers and extended inactivity periods.
The core issue is the redefinition of ‘abandoned’. While unclaimed-property laws were meant to protect genuinely lost assets, the shift to inactivity has raised concerns about property rights. If the system knows the owner and the account’s status, the investment should not be deemed abandoned.
The principle is simple: knowing the owner and maintaining account evidence should preclude the declaration of abandonment. Ownership rights should be respected.