Escheat is a legal concept that has been around for centuries. It is the process of a state government or other authority reclaiming both real and personal property when the original owners have died without a will or other legal document that determines the ultimate disposition of the property. This process kicks in after a certain period of time, which can vary from state to state. It is especially relevant for businesses who are considering how to handle their own assets upon their transition from the world.
How Does Escheat Work?
Under the concept of escheat, if the original owner of a piece of property is either unknown, or if that individual has passed away without leaving a will that explains who the property should belong to, the state typically has the right to take possession of the property. In many states, the period of time for which that property remains in limbo before it is subject to escheat ranges from three to five years, though there can be some variability.
Once the period of escheat has come into effect, the state authority typically takes possession of the property, and then seeks to find an appropriate recipient of such property. In some cases, it could revert back to the original owners’ family. In other cases, it could be sold with the proceeds distributed to the state treasury. Or another option is for the state to keep possession of the property.
The Impact on Business Owners
The concept of escheat can have a significant impact on businesses that are owned by individuals who pass away without an estate plan. In some cases, the process of escheat could strip the affected business of its assets, and truly complicate the transition of the company to its next owner. Because of this, it is important for business owners to consult with an attorney to ensure that they have a comprehensive estate plan in place which addresses what should happen to the business assets upon their passing.
Escheat can also be important for companies that might be involved in legal disputes with other parties. If a company holds assets that are somehow related to a dispute against another person or entity, that property may be subject to escheat. Because of this, it is important for businesses to understand the legal implications of such cases, as well the rules and regulations pertaining to escheat in their state.
Wrapping Up: What Businesses Should Know
Escheat is an important legal concept for businesses to be aware of, and is important when it comes to ensuring that the transition towards new ownership is clear and orderly. Not only this, but a company’s assets may be subject to escheat in various legal proceedings. Because of this, it is important for business owners and those holding positions with company decision-making authority to be aware of how escheat works, and what their rights and responsibilities are pertaining to such matters.