Katelyn Fugate believed she was doing something thoughtful for her young son. Several years ago, she opened a small savings account in his name. It was meant to grow slowly. A modest financial start for his future. Recently, she logged in to check the balance. She hoped to begin adding money again. Instead, the account showed nothing. The balance had disappeared.
Speaking to Scripps News, Fugate said the bank had marked the account as dormant after years without activity. It closed the account and transferred the remaining money to the state's unclaimed property department. When she tried to track it down, she encountered another problem.
The bank no longer had the funds. The state's missing money database did not show the balance either. For Fugate, the discovery was unsettling. What had started as a simple plan to save for her child had turned into a frustrating search for money she believed was safe. Her experience is not unique. Across the US, millions of accounts sit idle, often forgotten for years. Many quietly enter a process that few people understand until it affects them directly.
The transfer of idle funds to the state is not a banking error. It is a legal process known as escheatment. Every state in the US applies some version of this law. If a bank account remains untouched for a certain period, it is considered abandoned. Once that threshold is reached, banks must transfer the remaining balance to the state treasury as unclaimed property. The timeframe varies between states.
Most set the dormancy window between three and five years. In recent years, several jurisdictions have shortened the period. Over a 16-year span, 17 states reduced their limits to three years. That means money can move into state custody faster than many account holders realise. Importantly, not every transaction counts.
Automatic deposits, interest payments or system transfers do not reset the inactivity clock. Only actions initiated by the account holder qualify. A manual deposit, withdrawal or transfer is usually required. Before the transfer occurs, banks attempt to contact the account holder. Notices are normally sent to the last known address. If that address is outdated, the warning may never reach the owner.
Even before an account reaches the state, another risk can slowly drain the balance. Inactivity fees. Ted Rossman, principal analyst at Bankrate, told Scripps News that some banks may begin flagging accounts after as little as six months without customer-initiated transactions.
That does not necessarily mean the account is closed immediately. But it can trigger monthly dormancy charges. These fees often range between $5-$20 per month.
For smaller savings accounts, the effect can be significant. A balance of only a few hundred dollars may gradually shrink. In some cases, the entire amount disappears before the state ever receives it. Dormant accounts can also disrupt automatic payments linked to them. Once an account closes, scheduled transfers fail. This may lead to missed payments or late charges elsewhere.
While individual cases attract attention, the scale offorgotten money is vast. Across the US, roughly $70 billion in unclaimed property sits in state treasuries, according to data from the National Association of Unclaimed Property Administrators.
Source: International Business Times UK
