Associations and "Unclaimed Property"

By Mark Alcorn and MaryAnne Bobrow

A relative passes away.  Charged with administering the estate, all due diligence is taken to ensure all property of the decedent had been property disbursed and/or disposed of in accordance with the decedent’s wishes.  Yet several years later, a notice arrives from the state of California that there exists unclaimed property of the decedent that will belong to the state unless it is claimed following procedures specified in the notice.  If you were in this situation, you would take all steps necessary to resolve the issue.  As an association professional, what does your association do when faced with similar dilemmas?

Does your association possess "Unclaimed Property"?  Before you answer “no,” consider that unclaimed property includes such items as dues that were supposed to be returned, a refundable deposit on booth space, a check that was returned to the association due to lack of current mailing information, wages for a former employee that can no longer be found, and/or uncashed payments to vendors that have become stale?  While the temptation may be great to void transactions such as those described above, the association or business does not get to keep this property.  In fact, possession of this property triggers significant responsibilities for the holder.

Unclaimed Property Legal Requirements

Many associations and businesses do not realize that they hold unclaimed property, or that they are subject to reporting requirements and possibly the obligation to turn the unclaimed property over to the state.  

In California and many other jurisdictions, the law requires associations and businesses to give written notice to the owner of the unclaimed property.  If the property is not claimed, the association must report that it is holding the property to the State Controller on state issued forms.  Then, if the property remains unclaimed, the association must pay or deliver to the State Controller the "abandoned" property.  Property is presumed to have been abandoned when it remains unclaimed by the owner for more than three years after it became payable.  

Additionally, an association or business must maintain records concerning unclaimed property for a period of seven (7) years.  

Significant penalties can be incurred for failure to abide in these laws.  These penalties include fines and interest at a whopping 12% per year.  Some penalties can be excused under limited circumstances.

Recommendations

How can you ensure your association complies with laws governing unclaimed property?  We recommend that association bylaws make it clear that dues, booth fees, sponsorship fees, and similar funds are not refundable.  We also recommend that a special account be established for unclaimed property, and that the association adopt internal policies that help ensure that unclaimed property is handled properly.  If possible, return unclaimed property to its rightful owner not later than three (3) years from the date it first became payable/returnable.

We also recommend that associations inform and educate their respective memberships about laws pertaining to unclaimed property.  An informative summary of the law, an excerpt of the law, and simple forms the members can use could be a great service to the membership.

Resources

Information about California's unclaimed property law can be found at http://sco.ca.gov/upd_faq_about_q01.html.  Unclaimed property law and regulations are available at http://www.sco.ca.gov/Files-UPD/guide_upd_updlaw.pdf.

Mark D. Alcorn
Attorney/Management Consultant
1000 Q Street, Suite 120
Sacramento, CA  95811
P: (916) 444-5959
C: (916) 320-6456
F: (916) 443-6719

Website:  www.alcornassociates.com
Email: mark@alcornlaw.com

 

MaryAnne P. Bobrow, CAE, CMP, CMM, CHE
Bobrow & Associates
Association and Meetings Management
6060 Sunrise Vista Drive, Suite 1300
Citrus Heights, CA  95610
Phone:       (916) 722-8168
Fax:             (916) 722-8149
Website:  www.bobrowassociates.com
Email:         maryanne@bobrowassociates.com