What Happens to Dormant Bank Accounts?

Circumstances like illness, death, or just poor record-keeping can result in bank accounts being forgotten and left to lie dormant. Over the short term, the contents of dormant accounts remain in place. If they continue to be unchecked for an extended period, they may end up being seized or whittled down to nothing. If you have a dormant account out there somewhere, it's important to know what may have happened to it and how to go about getting the funds back.

Each state has its own set of rules regarding the seizure of dormant funds from banks and financial institutions. If a bank has tried and failed to contact an account-holder over the required period of time due to her relocation, death or other circumstance, the bank must then turn over the funds to the state government, where it will enter the treasury. The state can then legally use the money as part of the annual budget but must be returned to the rightful owner if she puts in a claim for it. A final standard warning is issued to the customer one month prior to the state seizure. If no response is received by the deadline, the funds are taken. The same laws apply to safe deposit boxes, stocks, rent deposits, insurance claims, uncashed checks and even retail gift cards.

Dormant bank accounts are still subject to fees, maintenance charges and any other penalties the bank may levy. In the case of checking accounts that typically do not accumulate interest, the fees can erase the balance over time or even put the account in the red. In the case of savings and other interest-earning accounts, the fees can still make a dent, depending on the starting balance. Fees and charges will continue to be assessed until the time when state law deems the account be turned over to the treasury, where the bank no longer has access to the funds.

When a bank or financial institution closes due to federal oversight or other legal action, the Federal Deposit Insurance Corporation (FDIC) is responsible for managing the contents of any existing accounts and ensuring that account holders are able to access and reclaim their funds. Each account is insured for up to $250,000, over which the funds may be considered a loss for the depositor. In some cases, the FDIC is unable to contact account-holders due to inaccurate or old account information. In this case, individuals are responsible for checking with the FDIC to find money that has lain dormant.

To locate any funds that may have been seized due to extended dormancy, visit the website of your local state comptroller. Many states have online search options that require only your first and last name to discover what monies you may have neglected to collect over the years. Some states prefer to let an outside agency handle the details but in either case, you will be directed to the right place for performing a search. Once you've found unclaimed assets that belong to you, a claim can be made electronically or by mail.