Due Diligence Letter

The basic components of a due diligence letter include:

1. a statement that the unclaimed property will be reported to the State if the Owner does not respond;
2. a statement of property type;
3. a statement that the Owner can always reclaim the property from the State;
4. a statement of the date by which the owner must respond back to the Holder in order to claim the property;
5. and the name, address, email and phone number of the Holder contact person on the letter.

A typical State due diligence statute includes the following: The Holder has an address in their records for the apparent Owner and the records do not indicate that the address is bad or inaccurate. (some State statutes say an address where “mail can be delivered”). The claim of the apparent Owner is not barred by any other law of this State (child support/delinquent taxes). The value of the property is at least ____ dollars [$____]. In most States the due diligence amount corresponds with the State’s aggregate amount. So if a State has an aggregate amount of $50.00, then the Holder would only need to perform due diligence on property items valued over $50.00.

There are about a dozen or so States that require certification that the due diligence was done. This is normally fulfilled when an Officer of the company signs the State affidavit/verification & checklist.

There are a few States, where under certain situations, require the Holder to send out their search letters Certified Mail, and in some cases this mailing cost is deductible. These States include Iowa, New York, New Jersey and Ohio. Please refer to each State’s individual statutes for further information.

Although most States do not allow the cost of the search letter mailings to be deducted (it is considered the “cost of doing business”), California, Illinois and Nevada are three States where the Holder may deduct the cost of these mailings. Please refer to each State’s individual statutes for further information.

The Holder checklist for due diligence should include the following prior to any mailing.

1. Has the Owner increase or decreased the account?
2. Has the Owner contacted the Holder about the account?
3. Has the Owner indicated an interest in property?
4. Does the Owner have any other accounts with the Holder?
5. Is the Owner a current employee of the Holder’s?
6. Is the Owner a well-known individual business or government entity?

How long should the Owner have to respond to the search letter?

Some States prescribe a specific time period. Some States say 30 days, where others say 60. Some States say until October 1 before a November 1 report due date. Others actually suggest to “allow enough time for the Owner to respond”.

Are there audit concerns for non-compliant due diligence?

Yes. All Holders need to keep documentation to verify due diligence was performed and also keep a copy of what the actual letter looks like and says. Some State statutes now allow for penalties for due diligence non-compliance.