Unclaimed Property - More than $1 Trillion in 401K Accounts Are Unclaimed Along with Billions of Dollars in Other Assets
Pending before congress is a bill referred to as SECURE 2.0. You may remember that the SECURE Act, a bill that fundamentally altered the landscape for estate planning with retirement accounts, was passed in 2019. This post is not about the SECURE Act or SECURE 2.0, but rather about the impact of lost assets, what you can do about it if you are administering an estate, and how SECURE 2.0 might help. According to a recent article on MarketWatch.com, Americans have lost more than $1 trillion in forgotten 401K plans. You read that right $1 Trillion! According to the study that was done, the average balance of a forgotten 401K is $55,400. The study estimated that higher fees and lower returns on these accounts could be costing individual nearly $700,000 in lost retirement savings over their lifetimes. So how does this happen? Most of these accounts are from employer-sponsored plans. When the employee changed jobs, as many do, they often leave the account with the former employer rather than moving it.
Right now, you as the former employee or administrator of an estate have options in locating these assets, but it can take a bit of work. The old 401K may be with the former employer, the plan administrator, or the State Unclaimed Property Division. You would need to check with each. SECURE 2.0 is proposing the creation of a nationwide central registry of lost 401Ks. Depending on how it is ultimately structured, this could be a great resource moving forward.
While $1 trillion is a big number, 401Ks are just one asset that may have been lost or forgotten by the deceased individual. Billions of additional dollars in unclaimed property are held by states and the federal government. Unclaimed property usually results when we don’t update our address, or we get married, divorced, or otherwise change our name. It can also happen after the death of an individual when the person holding assets isn’t aware of where to send the assets held. After several years, if the property is not claimed, the business or organization is required by law to report it and turn it over to the appropriate state agency (typically, in the state of the owner’s last known address). The state will then hold the property until the owner files a claim to obtain it.
In your estate plan, you should regularly update an inventory of your estate and include information about where assets may be located. You should also check annually the unclaimed property division of your state to see if any assets are being held. If you are administering the estate of a deceased individual, you should likewise check these sources. The federal government provides a great resource here: https://www.usa.gov/unclaimed-money. There are also companies who can help you with these searches for a fee.
If you think you personally or an estate you are representing may have lost assets, definitely take the time do a little research. Maybe some of that $1 trillion belongs to you.
This post is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem. Nothing herein creates an attorney-client relationship between Hallock & Hallock and the reader.