Final answer:
Escheatment is the legal process where unclaimed property reverts to state ownership when an individual dies without a will/heirs or when an asset remains unclaimed for a certain period. Financial institutions must turn over these assets to the state, which then seeks to locate rightful owners.
Step-by-step explanation:
Escheatment is a legal process whereby unclaimed property or assets revert to the state's ownership when an individual dies without a will and without heirs, or when a financial asset, like a bank account or security, goes unclaimed for a certain period of time. This usually happens after a dormancy period during which there has been no activity in the account by the owner. The dormancy period is determined by state law. When escheatment occurs, institutions are legally obligated to hand over these assets to the state. It is then the state's responsibility to attempt to locate the rightful owners or heirs before permanently assuming ownership.
Common assets that may be subject to escheatment include bank accounts, uncashed paychecks, insurance proceeds, or stocks and bonds. It is assumed that this process protects the assets until they can potentially be reclaimed by the rightful owners or their heirs. In the context of uncashed paychecks, it protects the rights of employees to possibly recover wages owed to them that were not collected within the prescribed period.