Each year large numbers of owners and heirs – who may not be aware of a deceased family member’s IRA or roll-over 401k – fail to claim accounts to which they’re entitled, due to the long term nature of this type of investment,
A Traditional IRA is considered unclaimed if a withdrawal is not made by age 70½; the age at which non-withdrawal triggers a 50% tax penalty under the IRS code. Both Traditional IRAs and Roth IRAs may be considered abandoned if you do not cash a distribution check, which can occur when you reach age 59½ or before, if early withdrawal is taken.
While unclaimed 401(k) retirement plan assets are subject to federal guidelines mandated by ERISA [Employee Retirement Income Security Act of 1974]; most lost and forgotten IRAs at banks, brokerages and insurance companies are not. They come under the purview of state unclaimed property statutes, based on a legal doctrine known as escheat.
The rules for determining how a dormant and unclaimed IRA is treated depend on the type of account and the owner’s state of residence.
- Traditional IRA and Roth IRA
- Rollover IRA: Automatic rollovers for terminated / abandoned plans
- Rollover IRA: Automatic rollovers for non-responsive participants
- Missing Participant IRA / Default Participant IRA
- Coverdell Education Savings Accounts
- Health Savings Accounts