What are unclaimed assets?
When a legal event occurs that mandates that assets are passed on to another person or entity, but that transfer of ownership does not take place, those assets are known as ‘unclaimed assets’. They are different from ‘abandoned assets,’ which can be categorized as assets that have remained dormant (with no activity or contact with their owner) for a given period of time, which differs for every jurisdiction.
Unclaimed assets can be anything from real estate, pension funds and bank accounts to insurance policies, stock dividends, and royalties. While there are many reasons for an asset to be abandoned (such as someone forgetting they own it), there is usually one reason for assets to go unclaimed, and that is their new owners not knowing where and how to claim them.
Why do unclaimed assets exist?
Unfortunately, not all institutions that hold assets have rigorous policies and processes to establish the passing of an asset’s owner. Often, institutions do not know the owner of a certain asset has passed away and that the asset is supposed to be transferred to a new owner. The new owner might be the deceased’s next of kin, an explicitly named beneficiary via a will, or even the state (if none of the aforementioned exist). If the institution does not know of the event or is unable to locate the beneficiaries of the asset’s owner, they usually transfer the asset to the state for safeguarding until the new owner comes forward and claims it.
That, in combination with the original owner of those assets not using a digital inheritance service such as DGLegacy or having a will, often leads to many assets never reaching their rightful owners. Billions of dollars a year never reach the beneficiaries of deceased people, and the number is growing at an alarming rate each year.
What are the effects of unclaimed assets?
There are a couple of major consequences of assets remaining unclaimed.
- The first has to do with the compliance of asset-holding organizations such as banks, pension funds, and stock brokers. They are required by law to have processes and policies in place concerning unclaimed assets. If they do not comply with regulations and do not declare certain assets as unclaimed (having met specific criteria to be designated as such), they can be fined by the government.
- Another major consequence of unclaimed assets concerns primarily their owners. It’s fairly common for one of the partners in a family to be financially literate and take care of the family’s assets. It’s always a good idea for both partners to share that responsibility, but that’s often not the case. If the person who’s responsible for the material well-being of the family suddenly passes away, the rest of the family might find themselves in a very difficult situation. They’d not only be grieving for the loss of their loved one but would also find themselves in a vortex of bills, taxes and other responsibilities, making matters even worse.
How to mitigate the risk of unclaimed assets
As explored above, unclaimed assets are a serious concern which must not be taken lightly. They are a severe problem on their own, but when we take into consideration the fact they become unclaimed during times of extreme hardship for their owners, that significantly increases their negative effects.
Fortunately, there are many proven methods to mitigate the risk of unclaimed assets. These are the key things you can do:
- Don’t leave your loved ones behind
When you improve your financial literacy, don’t forget there are people depending on you. While understanding the stock market or knowing how to navigate the complex world of insurance are tremendously useful skills, their true positive effects are shown when both partners in a family share that knowledge.
- Inform your loved ones of your assets
Unforeseen events are called that for a reason. It’s one thing to know something bad is coming; it’s a completely different story when something happens out of the blue. It’s of paramount importance to let your loved ones know of your assets — at least what they are and in which organizations they are.
- Use a digital inheritance service
Fortunately, we live in a time where technology makes quantum leaps every single day. Digital inheritance services exist to help you mitigate a great deal of the risk associated with unclaimed assets. Our DGLegacy application allows you to categorize your assets in a safe space and designate beneficiaries for each of them. The proprietary algorithm we use in our Heartbeat protocol ensures your loved ones are notified should something unforeseen occur, so they’ll be proactively informed about their designated assets without having to worry about remembering access details or the location of physical vaults. Digital inheritance services such as DGLegacy ensure your loved ones will be able to identify and locate the digital and financial assets that you’ve designated to them.
- Create a will
Though we live in a technologically advanced time, creating an old-fashioned will is never a bad idea. Taking the time to name your beneficiaries in a legally binding format is one of the best investments you can make. Nowadays, you can also create a digital will — and we’ve made sure to explore that option and provide all you need to know about it in our dedicated article on the topic.