Escheat In Real Estate Explained

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What Is Escheat In Real Estate?

What Is Escheat In Real Estate?

When a person dies without any heirs or with no will to direct the distribution of their estate, the property and assets fall into what is called escheat. This legal term refers to the government's right to take possession of those assets.

The process of escheatment can be triggered in several ways, including when the property has been unclaimed for an extended time or when there are no living relatives of the deceased.

The term "escheat" comes from the Anglo-Norman word Eschete, meaning "to fall into the king's hands." When preparing for your exam you should know this term. There are a few other circumstances that can lead to escheatment, as well.

For example, some states have laws that require businesses to turn over unclaimed property, such as uncashed paychecks or unclaimed customer refunds, to the state after a certain period.

And if someone abandons the property, it may eventually be escheat to the state. Escheatment is generally seen as a last resort by states.

The goal is not to take away people's property, but rather to protect it and ensure that it goes to the rightful owner. In most cases, the state will hold onto the property until someone comes forward to claim it.

Escheatment Of Unclaimed Assets

Escheatment can also apply to unclaimed assets, such as bank accounts, stocks, and life insurance policies. When an account is considered "dormant," meaning there has been no activity on it for a certain period, the state may take possession of it.

The same is true for stocks and other investments that have been inactive for a prolonged period. And if someone dies without beneficiaries listed on their life insurance policy, the state may step in and take possession of those assets.

Escheat rights differ by asset type and state; they are, of course, different in each state. The length of time during which the government can reclaim assets varies widely by asset category and state. After a certain period has passed, escheatment is generally triggered automatically for financial accounts.

Escheatment is a complex process, and it's important to understand all the ins and outs before taking your real estate exam. Be sure you know the definition of escheatment and how it can apply to both property and assets.

Escheatment Example

To better understand how escheatment works, let's look at an example.

John Doe dies without a will and without any known heirs. His house and all his belongings are now considered unclaimed property. The state where John lived has a law that requires businesses to turn over unclaimed property to the state after a certain period of time.

John's bank accounts, stocks, and life insurance policy are all considered unclaimed assets. The state will take possession of these assets and hold onto them until someone comes forward to claim them.

Conclusion

Escheatment is a complex process, but it's important to understand the basics before taking your real estate exam. Be sure to review the definition of escheatment and how it can apply to both property and assets. If you are unclear on anything that has to do with the escheat process, be sure to research as much as possible so that you fully understand.

If you want to see some examples of questions that will be on the actual real estate exam, check out our free real estate practice exam. We have been named as the best real estate exam practice for 7 years in a row!

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