Unclaimed Property Due Diligence: A Practical Guide for Holders
You’ve finally organized your outstanding checks and ensured you aren’t remitting a penny more than necessary to stay compliant. But right as you run a final check on your data, you hit state due diligence mandates.
What exactly is unclaimed property due diligence, and what does your company actually need to do to comply?
One state defines it as a written notice sent to an owner, after a dormancy period hits, warning them that their assets will head to the state unless they reach out. Another state calls it using “reasonable and prudent methods” to find owners of inactive accounts.
No matter how a specific state words it, due diligence is a mandatory step. You have to reach out—usually through a first-class mailing—to try and re-establish contact. It really is the beast inside the beast of compliance reporting.
What Are You Trying to Accomplish?
The due diligence process focuses on three straightforward goals:
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Re-establishing direct contact with the actual owner.
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Returning the unclaimed assets to the rightful person.
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Clearing out dormant property that has been sitting on your books for years.
The Real Business Benefits
Doing this right isn’t just about avoiding state penalties. It actually brings a few solid business advantages:
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Better Client Communication: You actively reconnect with missing clients or vendors.
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Lighter Reporting Burdens: Finding an owner removes that item from your reporting obligations completely.
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Great Customer Service: Proactive outreach builds trust and shows goodwill.
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Less Internal Work: Cleaning up these accounts means fewer line items to track later.
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New Business Opportunities: Reconnected owners frequently turn around and re-deposit those lost funds back into active accounts with your organization.
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Risk Mitigation: Most importantly, performing timely due diligence alleviates costly fines or non-compliance penalties.
Deadlines and Timing Constraints
While most state laws don’t dictate the exact look of your letters, almost all of them require you to send something.
As a rule of thumb, you must mail your search letters 60 to 120 days before your report due date. For most businesses, that means printing and mailing between July 1 and September 1. If you handle insurance or spring reporting, your mailing window shifts to between January 1 and March 1.
Most states mandate first-class mail and treat the postage as a “cost of doing business,” meaning you can’t deduct the expense.
A few jurisdictions—Delaware, New York, and Puerto Rico—also force certain organizations to publish notices in local newspapers. In Puerto Rico, this applies to companies incorporated or physically located on the island. In New York and Delaware, it primarily targets financial institutions and insurance companies. Check individual state rules for the exact specifics on these advertising laws.
Anatomy of a Compliant Due Diligence Letter
To keep the state regulators happy, your letters need to contain a few non-negotiable details:
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A clear statement warning the owner that their property will move to the state if they don’t reply.
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A description of the property type.
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A note reminding them that they can always reclaim the property from the state later if they miss the deadline.
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A hard response deadline date so the owner knows when time runs out.
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Your company’s name, address, email, and phone number for a dedicated contact person.
When Do You Actually Have to Send a Letter?
You generally need to send a letter if you have a physical address on file and your records don’t explicitly say the address is bad or undeliverable. The owner’s claim also can’t be barred by other local laws, like outstanding child support or delinquent taxes.
Dollar amounts matter here, too. Most states tie their due diligence requirements to their aggregate reporting limits. For example, if a state has a $50 aggregate threshold, you only need to run the due diligence process on items valued above $50.
Keep in mind that about a dozen states require you to certify that you actually completed this work. Usually, an officer of your company signs off on this via a state affidavit or verification checklist.
Certified Mail and Cost Deductions
A handful of states require you to use Certified Mail instead of regular first-class mail under specific circumstances. The good news is that you can sometimes deduct the postage costs in these areas. Look closely at the statutes for Iowa, New York, New Jersey, and Ohio to see if your mailings qualify.
While standard mail costs aren’t deductible in most places, California, Illinois, and Nevada are the exceptions. They explicitly let Holders deduct these mailing expenses directly from the report.
The Pre-Mailing Internal Checklist
Before you waste money on postage, scrub your ledger against these questions:
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Has the owner made any recent deposits or withdrawals on the account?
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Have they reached out to your team about the account recently?
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Have they shown any active interest in the property?
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Do they have other active accounts with your organization?
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Are they a current employee on your payroll?
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Is the owner a well-known local business or government entity?
Handling Response Windows and Audit Risks
How much time should you give people to reply? Some states dictate exact timelines, usually between 30 and 60 days. Others want replies by a specific date, like October 1 before a November 1 filing deadline. A few states simply tell you to give the owner “enough time to respond.”
Skipping these timelines or failing to keep records opens you up to major audit headaches. State auditors will demand to see proof that you sent the letters, along with a copy of the exact language you used. Because many states now enforce strict penalties for skipping due diligence, accurate record-keeping is non-negotiable.
Smart Tactics to Boost Your Response Rates
Because due diligence is your final safety net before escheatment, it pays to maximize your return rate. Consider launching internal outreach campaigns 6 to 12 months before the legal dormancy period ends. This drastically reduces the number of accounts that ever require certified mail or formal reporting.
When you do send the official letters, use these practical tips to get people to open them:
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Fix Your Envelopes: Don’t let your mailers look like junk mail. Print bold, clear text on the front like “Time Sensitive – Open Immediately,” “Mandatory Response Required,” or “Unclaimed Funds Enclosed.”
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Shorten the Deadline: Give them 30 to 45 days to reply. A tight window forces people to take quick action instead of throwing the letter in a pile.
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Make Replying Easy: Let them respond by fax, email, phone, or mail.
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Ditch the Jargon: Write like a human. Use simple, direct words rather than confusing legal terms like “Escheat.”
Getting Your Workflow Under Control
Staying on top of scattered state due diligence mandates can feel like an administrative nightmare. But once you establish a solid internal process and run through it a couple of times, it shifts from a compliance burden to a routine, integrated part of your standard operating procedures.
Need Expert Assistance?
Please feel free to contact Pat Healy directly at 410.303.5510, or email him at phealy@peacc.com to discuss the cost advantages of turning to PEACC.com as your total solution to unclaimed property compliance!
