A dormant account is any financial account that hasn’t had posted activity—such as deposits, withdrawals, or transfers—for a set period of time. Interest doesn’t count as a posted activity because it’s performed by the financial institution, not the account owner.
If your account goes dormant, your financial institution is required to escheat, or send, any remaining funds to the state. The state then holds onto your money indefinitely until you or a beneficiary claims it.
Here’s what you need to know about dormant accounts and what to do if your financial institution sends your remaining funds to the state.
Definition and Examples of a Dormant Account
Any financial account that hasn’t had activity for a long time—often five years—minus the posting of interest, can get flagged as a dormant account.
Some common examples of accounts that can be flagged as dormant accounts include:
- Checking accounts
- Savings accounts
- Money market accounts
- Certificates of deposit (CDs)
- Investment accounts
But dormant accounts can also include other types of “property” such as:
- Safety deposit boxes
- Uncashed checks and money orders
- Life insurance payments
- Annuity contracts
- Tax refunds
The period of time that has to pass for an account to go dormant varies by state and account type but the most common time frame is three to five years.
In California, Connecticut, and Illinois, most bank accounts go dormant after three years. In Delaware, Georgia, and Wisconsin, it’s five years. In most states, wages and salaries go dormant as soon as 12 months.
How Does a Dormant Account Work?
There’s a gradual process that takes place when an account goes dormant. For bank accounts, it usually looks like this, although exact time frames vary:
- You don’t make any deposits, withdrawals, or transfers to your financial account for 12 months.
- Your financial institution flags your account as inactive and potentially starts charging you a monthly inactivity fee.
- You still don’t post any activity to your account or make any transactions for another 24 months.
- Your financial institution then changes your account status from “inactive” to “dormant.” It closes your account and sends any remaining funds to the state.
Depending on your state, these funds will either be held by the Office of the Treasury or the Department of Revenue.
Throughout this entire process, your financial institution is legally required to attempt to make contact with you, which is one reason why it’s important to keep your contact information up to date. If they can’t reach you, they will likely send one final notice before they hand everything over to your state.
How To Claim Escheated Funds From a Dormant Account
You can follow these steps to see if you have escheated funds from a dormant account:
- Search for unclaimed funds using a database like the National Association of Unclaimed Property Administrators or MissingMoney.com.
- Follow the instructions for claiming any funds you find.
- Submit the required documentation needed to verify your rights to the funds. This could include your Social Security card, a copy of your driver’s license, or proof of residency.
- Pay any processing fees, if required.
- Wait for the state to send you your funds.
Why Do Accounts Go Dormant?
Accounts go “dormant” simply because an account holder hasn’t made any deposits, withdrawals, or transfers in a set period of time. This could happen if someone lost their job or even died, for example. Accounts are then flagged as dormant for being inactive. Once an account has been inactive for a certain stint, a financial institution is legally required to escheat the remaining funds to the state.
The state doesn’t just leave this money to collect dust, though. It typically puts it to work by funding roads, schools, prisons, and other public projects. The funds are tracked as debt on the state’s balance sheet, so it can rightfully repay the money to the owner or beneficiary if they show up.
How To Keep Your Account From Going Dormant
The key to avoiding a dormant account is to let your financial institution know you haven’t forgotten about it. Some easy ways to do this are to periodically:
- Make a deposit, withdrawal, or transfer from the account, even if it’s just $5
- Update your contact information
- Log in to the account’s online portal
- Contact your institution by phone, email, live chat, or in person at a branch
- A dormant account is any financial account that isn’t used for a set period of time. The exact time frame varies by state.
- Bank, investment, and retirement accounts are examples of accounts that could become dormant.
- Financial institutions are legally required to escheat, or transfer, funds in a dormant account to the state after a set period of time has passed.
- The state holds onto these funds indefinitely where you or a beneficiary can reclaim them at any time.
- You can search to see if you have any unclaimed funds through a database like the National Association of Unclaimed Property Administrators or MissingMoney.com.