Idle Bank Accounts At Risk: Why Your Forgotten Money Could Be Turned Over To The State

Katelyn Fugate believed she was doing something thoughtful for her young son. Several years ago, she opened a small savings account in his name. It was meant to grow slowly. A modest financial start for his future. Recently, she logged in to check the balance. She hoped to begin adding money again. Instead, the account showed nothing. The balance had disappeared.

Speaking to Scripps News, Fugate said the bank had marked the account as dormant after years without activity. It closed the account and transferred the remaining money to the state's unclaimed property department. When she tried to track it down, she encountered another problem.

The bank no longer had the funds. The state's missing money database did not show the balance either. For Fugate, the discovery was unsettling. What had started as a simple plan to save for her child had turned into a frustrating search for money she believed was safe. Her experience is not unique. Across the US, millions of accounts sit idle, often forgotten for years. Many quietly enter a process that few people understand until it affects them directly.

The Law Behind Dormant Accounts

The transfer of idle funds to the state is not a banking error. It is a legal process known as escheatment. Every state in the US applies some version of this law. If a bank account remains untouched for a certain period, it is considered abandoned. Once that threshold is reached, banks must transfer the remaining balance to the state treasury as unclaimed property. The timeframe varies between states.

Most set the dormancy window between three and five years. In recent years, several jurisdictions have shortened the period. Over a 16-year span, 17 states reduced their limits to three years. That means money can move into state custody faster than many account holders realise. Importantly, not every transaction counts.

Automatic deposits, interest payments or system transfers do not reset the inactivity clock. Only actions initiated by the account holder qualify. A manual deposit, withdrawal or transfer is usually required. Before the transfer occurs, banks attempt to contact the account holder. Notices are normally sent to the last known address. If that address is outdated, the warning may never reach the owner.

The Hidden Cost Of Inactivity

Even before an account reaches the state, another risk can slowly drain the balance. Inactivity fees. Ted Rossman, principal analyst at Bankrate, told Scripps News that some banks may begin flagging accounts after as little as six months without customer-initiated transactions.

That does not necessarily mean the account is closed immediately. But it can trigger monthly dormancy charges. These fees often range between $5-$20 per month.

For smaller savings accounts, the effect can be significant. A balance of only a few hundred dollars may gradually shrink. In some cases, the entire amount disappears before the state ever receives it. Dormant accounts can also disrupt automatic payments linked to them. Once an account closes, scheduled transfers fail. This may lead to missed payments or late charges elsewhere.

Billions Waiting To Be Claimed

While individual cases attract attention, the scale of forgotten money is vast. Across the US, roughly $70 billion in unclaimed property sits in state treasuries, according to data from the National Association of Unclaimed Property Administrators.

These funds come from forgotten bank accounts, uncashed cheques, dormant investment accounts and abandoned safe deposit boxes. Government data suggests about one in seven Americans has some form of unclaimed property.

In the fiscal year 2024 alone, states returned $4.49 billion to rightful owners. Yet that represents only a fraction of the total funds currently held. California holds one of the largest pools of unclaimed money, with more than $15 billion waiting to be claimed. The issue has even drawn attention in Washington. A bipartisan proposal known as the SAFER Act seeks to limit when certain financial assets can be transferred under unclaimed property rules. The legislation remains under discussion.

How To Keep Your Accounts Active

Experts say preventing the problem is relatively simple. The key is regular activity. Rossman suggests account holders keep dormant accounts moving, even with very small transactions. A minor transfer or payment once in a while can reset the inactivity clock.

Some people link a small subscription payment to an unused account. Others schedule automatic transfers between accounts. Policies vary between banks, so checking the terms before opening an account can also help avoid unexpected fees. Another important step is keeping personal details updated. If the bank sends an inactivity notice to an old address, the customer may never receive the warning.

Checking For Forgotten Funds

For those who suspect they may already have lost track of money, recovery is still possible. Most states do not impose a time limit on claims. Search tools provided by the National Association of Unclaimed Property Administrators allow people to check official state databases for free. The process can take time, but the funds remain legally owned by the individual.

For parents who open savings accounts for their children, the lesson is straightforward. A brief check once a year may be enough to ensure that money stays where it was meant to be. Safely saved for the future, rather than waiting in a government vault to be reclaimed.