Unclaimed Property And Escheatment
Unclaimed Property And Escheatment ~ Outsourced Oil And Gas Accounting Services
To schedule a free consultation, please call (303) 463-8799 or fill out our contact form.
Each state has its own unique and specific laws that govern how “unclaimed” or “abandoned” property is handled, laws that include criteria for identifying, reporting, and remitting unclaimed property. Escheatment is the legal process of turning unclaimed or abandoned property over to the state, after due-diligence efforts to locate the rightful owner have failed and after the legal dormancy period has expired.
At ExTex, as part of our division order services, we do our best to distribute revenue to every royalty owner when payments are due. Sometimes, however, that is not possible – often because an owner has died or cannot be located, or because there are outstanding title issues.
When this happens, we are required to hold the funds in suspense while we make due-diligence efforts to locate the rightful owner. We are also obligated to send unclaimed property reports to the appropriate state (where the owner’s “last known address” is located), and eventually send those funds to the state if the owner cannot be located or if title issues cannot be resolved within the mandated period of time.
Typically, the state then acts as the “custodian” of the funds until the rightful owner comes forward to claim the property.
Due Diligence For Unclaimed Property
When it comes to unclaimed property laws, the due diligence process is one of the most time-consuming – and scrutinized – aspects of compliance. Although requirements are different in each state, the common denominator is that “reasonable steps” must be taken to locate owners before the suspended funds are turned over to the state.
Due diligence steps for locating royalty owners include:
- identifying the royalty owner (through division orders, 1099s, prior correspondence, deeds, probate filings, etc.)
- verifying the royalty owner’s address
- sending a written notice to the royalty owner’s last known address and following the strict timeframe for response
- using online subscription databases to look for family or heirs
Dormancy Dates For Unclaimed Property
The dormancy date is the point at which unclaimed property (such as unpaid royalties, suspense funds, or uncashed checks) is considered “abandoned” under state law. For oil and gas royalties, dormancy dates vary by state, but are typically 1 year, 3 years, or 5 years.
Risks And Liability For Non-Compliance
The importance of timely reporting and remittance for unclaimed property cannot be overstated! If unclaimed property is not handled properly, there can be significant penalties and fines. Also, if a company is flagged for mishandling unclaimed property, the likelihood of future audits increases (and audits can go back many years).
To further complicate matters, states are constantly changing their requirements for unclaimed property, which makes full compliance difficult for many oil and gas purchasers and operators.
Rest Easy – We Have This Covered
You can rest easy, though, when you choose ExTex to handle your division orders and back office accounting.
We have almost 30 years experience in all aspects of oil and gas accounting, including unclaimed property. Whether you have inherited suspense funds from another company, or you have funds accumulating from monthly disbursements, we will take care of every detail. We hit all of the due diligence requirements and deadlines (usually ahead of schedule), remit to all 50 states, and keep detailed records of our due-diligence efforts and their results.
For more information about unclaimed property services for oil and gas purchasers and operators, or to schedule a free consultation, call (303) 463-8799 or fill out our contact form.
ExTex Division Order Services, LLC is located in the Denver metro area (in Golden, Colorado), and we provide back office outsourcing services for oil and gas companies across the U.S. and Canada.