One of the most common misconceptions in California estate planning is that the state will take your assets when you die. That’s not how it works. Your assets pass according to your trust, will, beneficiary designations or California intestacy laws. However, assets can still end up in state custody if no one claims them, and that’s where the real problem begins.
Unclaimed property laws apply during life and after death. Financial institutions monitor accounts for inactivity. If there is no activity or contact for a statutory period, generally three years in California for most financial accounts, the institution must attempt to notify the owner. If there is no response, the asset is transferred to the California State Controller’s Unclaimed Property Fund through a process called escheatment.
The state does not become the owner. It acts as a custodian, holding the property until someone comes forward with a valid claim. There is generally no deadline to claim it, but that doesn’t mean it’s easy to recover.
In practical terms, once assets are turned over to the state, they become difficult to access. Families often do not know the accounts exist. Even when they do, the claims process can be time-consuming and require documentation that may no longer be readily available. As a result, funds can sit with the state for years.
This is not rare. California alone holds billions in unclaimed property, and nationwide the number exceeds $70 billion. These are not cases of irresponsibility; they are the result of ordinary life events.
People move and forget to update addresses. They change jobs and leave behind retirement accounts. They open accounts online and go paperless. They change names after marriage or divorce. Over time, accounts become disconnected from their owners.
After death, the risk increases significantly. If there is no organized inventory of assets, a successor trustee or family member may miss accounts entirely. Life insurance policies may go unclaimed because beneficiaries were never informed. Even significant assets can be overlooked simply because no one knew where to look.
The timeline matters. Accounts may sit inactive for several years before being transferred to the state and, once there, they can remain indefinitely until they are claimed. The longer they sit, the harder it can be to recover due to lost records or incomplete information.
This is not a legal failure; it is an organizational one.
The solution is straightforward but often overlooked. A complete estate plan should include a clear and regularly updated inventory of assets, including bank accounts, investment accounts, retirement plans and insurance policies. It should also include current contact information and basic identifying details.
Just as important, at least one trusted person must know where to find this information and how to access it when needed.
Updating your address with financial institutions, consolidating unnecessary accounts and reviewing your plan regularly can significantly reduce the risk of assets becoming unclaimed.
The bottom line is simple: The state does not take your assets when you die. But if no one knows what you have or how to claim it, those assets can end up sitting with the state for years. Proper estate planning ensures your assets stay where they belong, with the people you intend to benefit.
Send your questions to ccolan@colanlegal.com and use “Alpine Mountaineer estate planning question” as the subject. We’ll answer your questions in our upcoming issues. This article is provided by your local estate planning attorney, Corina Colan. The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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