So, I was up on a ladder cleaning out my gutters this afternoon thinking, “Man this would make a great metaphor for a post”. I’m pulling out half decomposed leaves 15 feet off the ground, which is never a fun task, and something I usually put off until as late in fall as possible. Yet, its such an important thing, as with clogged gutters eventually the water will start seeping into and damaging my home. So as I’m working, it hits me, the metaphor is cleaning up your financial accounts. This is post gold I tell you people, or at least I’d like to think.
Like the gutters, I often put off cleaning up my financial accounts. Sure, I ensure I’m well invested, I watch my asset allocation, and I’m very up on my net worth. However, what I don’t do regularly is ensure my assets are consolidated across accounts. I always tell myself there will come another day where I can do this. As such I have 4 brokerage accounts, 3 saving accounts, a checking bank account, and 2 bond accounts. If you are decently down the path to financial independence you might have this financial sprawl as well. It happened when you changed companies and you left a 401k stranded, or you changed banks to capture a signup bonus and you left that last few dollars in the old bank account. At the time I’m sure you figured you would get back to it. Besides, what’s the worst that could happen? It’s not like it’s going anywhere. At least that’s what you thought, right?
Escheatment
The state I live in, Delaware, has been stuck in a court battle as of late. The reason is something called Escheatment. The state itself gets a huge portion of its revenue from Escheatment. So what is Escheatment? Escheatment is a point at which the state takes your money because they deem you to have abandoned accounts. Have you ever heard those creepy commercials about unclaimed property that may be yours? Well, they are talking about Escheatment. Each state deems property in financial accounts to be abandoned based on a different time frame. The worst of them are just 3 years. Not executing a financial transaction on an account in this time period can result in Escheatment, and it is often not that easy to get the money back after the fact. Usually, you can only get the property back, not any interest, and only after contacting multiple agencies repeatedly. You can search for unclaimed property in your state by following links from here to your state’s unclaimed property page.
Simplicity for Simplicity Sake
So, needless to say having your account be claimed by the state is bad, but that’s not the only risk to overly complex financial accounts. Think about what will happen if something happens to you. Do all your heirs understand your complex network of accounts? Do they have access to them, or know how to gain access if you kick the bucket? In my personal case, my spouse would have trouble with a few of the more outlier accounts. Even if I do what J Money did, and write a letter to my wife with financial instructions she’s still liable to have a problem.
Which brings me full circle, as I finish this post I’ve added a to-do this week to close out and consolidate a few old accounts. I’m also going to explore the escheatment page for my state in case something like a utility refund occurred that I missed. You never know. But first, I have to finish those gutters.
I love the metaphor with the gutter leaves. I got married four years ago and one of the nice things that we did was combine all of our accounts and make sure we knew how to access both accounts in case something happened to us. In addition we also have an account on personal capital so my wife is well aware of where all our assets reside.
With that said when my wife’s mother passed away that was a nightmare trying to figure out what bank accounts she had where the money resided. Definitely something that we do not want to do to our children.
Companies like Personal Capital certainly help by giving a single place to view all accounts. One area I often wonder is if there is an equivalent that can help with insurance accounts? When my parents generation passes away I’m not looking forward to hunting for 40 year old whole life insurance policies. Thanks for the comment.
Wow, no wonder Escheatment has the word “cheat” in it haha!
I can’t believe something like that is legal.
I agree, having tidy financial accounts is probably something I should keep better track of!
You know, a few months ago, I visited a company in Oklahoma where the Company seemed to spend a decent amount of time finding the heirs of the Company’s original founders.
Many of the original founders did not keep good financial records and if the Company didn’t find the rightful heirs after a certain amount of time, the heirs’ shares would revert to the state. Kind of a similar situation.
Yeah the lawsuits in Delaware have largely been about whether they are executing it legally. They are supposed to attempt to contact you before taking the abandoned assets, however for various reasons sometimes this step is missed or fails to reach the user. The other angle is which state gets the money. For Delaware this has meant approximately 500 Million dollars a year in budget from a combination of individuals and companies. When you consider the population of the state is only 1 million that is kind of frightening.
I’ve seen the power of financial organization – when my grandmother passed away, all her accounts were well organized and it was easy for my mother and my aunt to deal with all things financial. Although things were spread around it was all recorded. That’s the route I take, plus I do have things consolidated somewhat. What I haven’t consolidated is because I can’t. For example, I don’t care for my companies 401k provider so I’m not going to roll my IRA’s over there, and I have savings bonds that I can’t move to a different institution. But having things consolidated and well organized makes it easy to do my quarterly net worth analysis
Very true, not everything can be consolidated. They key is to have a good handle on where everything is at and keep it simple. Thanks for providing your thoughts.
Absolutely agree that tidying up your accounts is important- no sense having idle accounts lying around. However, for some people, having multiple bank accounts is a good way to separate different goals. But you’re absolutely right- leaving a few dollars in bank accounts that you don’t use is pointless.