Delaware Unclaimed Property: Compliance and Recovery

Delaware unclaimed property laws represent one of the most significant financial compliance challenges for businesses incorporated in the United States. Because Delaware is the legal home to over a million legal entities, including a majority of the Fortune 500, its escheatment laws have a nationwide impact.

For corporations, understanding these regulations is essential to avoid costly audits and penalties. For individuals, the state holds billions of dollars in lost assets waiting to be claimed.

Key Takeaways

• Priority Rules: Under federal law, if an owner's address is unknown, the unclaimed funds are owed to the company's state of incorporation—often Delaware.
• VDA Program: The Secretary of State offers a Voluntary Disclosure Agreement program to waive interest and penalties for past-due property.
• Foreign Exemption: A 2024 law (SB 267) exempts property owed to owners with known foreign addresses from being reported to Delaware.
• Money Match: A new automated system now returns funds to eligible Delaware taxpayers without requiring them to file a formal claim.
• Audit Risk: Failing to respond to a VDA invitation within 90 days results in a mandatory referral for a rigorous state audit.

Why Delaware Collects Billions

The sheer volume of assets held by the state is due to a legal principle established by the U.S. Supreme Court known as the "Second Priority Rule."

How Priority Rules Work:

1. First Priority: Unclaimed funds should be reported to the state of the owner's last known address.
2. Second Priority: If the owner's address is missing or unknown, the funds must be reported to the company's state of incorporation.

Since so many major companies incorporate in the First State, Delaware legally claims the vast majority of "address unknown" assets. This includes uncashed payroll checks, unredeemed gift cards, and dormant securities from businesses operating all over the world.

The Annual Compliance Cycle

Companies incorporated in Delaware must strictly adhere to the reporting deadlines outlined in(https://delcode.delaware.gov/title12/c011/index.html) of the Delaware Code. The process involves identifying dormant accounts, attempting to contact owners, and remitting the funds if no contact is made.

Property Dormancy Periods

Different types of assets become "dormant" (reportable) after specific periods of inactivity.

• 5 Years: Wages, payroll, and commissions.
• 5 Years: Accounts payable and general ledger credits.
• 5 Years: Savings and checking accounts.
• 3 Years: Securities and equity (triggered by returned mail).
• 15 Years: Traveler’s checks.

Mandatory Due Diligence

Before sending money to the state, holders must try to reunite the property with the owner.

• Threshold: Required for items valued at $50 or more.
• Timing: Notices must be sent 60 to 120 days before the report filing deadline.
• Language: The letter must explicitly state that the asset is "in danger of escheating" to the State of Delaware.

The Voluntary Disclosure Agreement (VDA)

To encourage compliance without litigation, Delaware offers a(https://vda.delaware.gov/). Administered by the Secretary of State, this program is the primary alternative to an aggressive state audit.

Benefits of the VDA:

• Interest Waiver: Participants are not charged the standard 0.5% monthly interest on late property.
• Control: The review is self-directed by the company rather than led by third-party auditors.
• Release: Upon completion, the state grants a release of liability for the covered years.

The 2025 Invitation Cycle: The state mails VDA invitations twice a year, typically around April 11 and August 15. If a company receives an invitation, it has exactly 90 days to enroll. Failure to respond triggers a mandatory referral to the Department of Finance for a full examination.

The Audit Process and Risk

If a company ignores a VDA invitation or is selected for enforcement, it faces an examination by the(https://unclaimedproperty.delaware.gov/). These audits are often conducted by third-party firms like Kelmar Associates.

Key Audit Features:

1. 15-Year Lookback: Auditors review 10 years of reportable history plus the 5-year dormancy period.
2. Estimation: If a company lacks records for older years (a common issue), the state estimates liability. They calculate an error rate from available records and extrapolate it back to the years with missing data.
3. Penalties: Unlike the VDA, audits can result in significant interest assessments and penalties for failure to report.

Recent Legal Changes (2024-2025)

The regulatory landscape has shifted recently, introducing both relief and new complexities for holders.

Foreign Address Exemption (SB 267)

Enacted in August 2024, Senate Bill 267 provided a major win for multinational corporations. It clarified that property owed to owners with a known address in a foreign country is not reportable to Delaware. This prevents the state from using the Second Priority Rule to claim foreign assets.

Illicit Property Guidelines

In 2025, the state issued controversial guidelines regarding "illicit property"—accounts linked to fraud or fake identities.

• The Rule: Holders must report this property using the information on file, even if it is known to be false.
• The Risk: Reporting known false data to a government agency creates legal friction for holders, who must balance state guidelines against federal anti-fraud laws.

Recovering Lost Assets

For individuals, Delaware serves as a massive custodial bank. The state does not spend the principal of these funds; it holds them in perpetuity until claimed.

The "Money Match" Program

Delaware has modernized its return process with the "Money Match" system.

• How it works: The state cross-references unclaimed property data with state income tax records.
• The Benefit: If a match is verified, the state automatically mails a check to the taxpayer.
• No Claim Needed: Qualifying owners do not need to file paperwork or prove their identity; the system handles the verification internally.

Filing a Manual Claim

If property is not returned automatically, owners can file a claim online.

1. Search: Use the state's official portal or multi-state databases.
2. Verify: Upload proof of identity (Driver’s License) and proof of address (utility bill matching the reported address).
3. Heirs: If the original owner is deceased, the claimant must provide a death certificate and letters testamentary to prove their right to the funds.

Frequently Asked Questions