Dormant accounts are bank accounts that have not posted any customer-generated activity for an extended period of time. In most cases, accounts of this type contain relatively low balances. Just about any type of interest-bearing account could become a dormant account, but most examples involve savings accounts that appear to have been abandoned by their owners.
There are several reasons why an account may become dormant. Owners sometimes move and forget to close the accounts. Over time, they forget about the accounts. In other situations, the owner of the account may die, leaving no information about the existence of the savings or checking account to alert executors or beneficiaries of the need to close the account and distribute the funds. A parent may open a savings account for a child that is later forgotten as the child grows older. Just about every instance of this type of bank account situation has to do with the account being overlooked or forgotten in some manner.
In many countries, there are laws that govern the handling of a dormant account. Often, the funds remain available to the owner or the beneficiary upon request, and with the presentation of documents that confirm the identity of the person making the request. There are some areas of the world where regulations allow banks to stop applying interest to the dormant account under certain circumstances, but in most cases the interest will continue to accrue over the years.
The banking regulations in some nations, such as the United States, do make it possible for a dormant account to be reverted to the state. Certain conditions must apply, including proof that the bank made reasonable efforts to locate the account owner. Depending on the circumstances, the state may utilize the funds in any manner that is allowed under the current Escheat laws, or make attempts of their own to reunite the account owner with the funds contained in the account.
Many states within the US operate what is known as an Unclaimed Property division. This division is often associated with either the state treasury or the state revenue department. A dormant account can be reported to this division by the financial institution, and the funds can be forwarded to its care. Many states operate databases that are accessible to the public, allowing anyone to search for evidence that they may have funds that are currently being held by the state. By following the procedures put in place by the state, it is possible to claim those funds. Assuming that the claim is considered valid by the state, the funds are issued to the claimant, and the property is considered claimed.
