SAFER Act Would Recast Escheatment for Investments

Introduced on April 16, the bipartisan SAFER Act would sharply narrow the circumstances under which states can take custody of certain investment-related property under unclaimed property laws. The proposal applies to securities, digital assets, and investment accounts held by financial institutions. It would replace traditional activity-based escheatment with a primarily death-based standard.

Background

State unclaimed property regimes traditionally rely on account inactivity and failed contact by custodians as indicators that property has been abandoned, and most states do not require custodians to monitor or verify whether account owners are deceased. The typical state escheatment process involves a three-to-five-year account dormancy period, followed by custodian outreach and, if the owner does not respond, transfer of the property to the state. In many jurisdictions, the state then liquidates the property, leaving owners or heirs to recover only the remitted value (value at the time of escheatment) rather than subsequent market appreciation.

Bipartisan proponents of the SAFER Act contend that the bill is needed to address increasingly aggressive state dormancy standards that have exposed long-term and passive investors to escheatment, even when the owner fully intends to retain the account for retirement or other future use.

New framework for assets owned by natural persons

The bill distinguishes between covered assets directly held or beneficially owned by natural persons and covered assets directly held or beneficially owned by an entity or a person other than a natural person. For covered assets held or beneficially owned by natural persons, inactivity alone no longer would support escheatment of a covered asset. Instead, a financial institution could not yield custody to a state unless:

• It has confirmation that the owner died at least three years prior
• No fiduciary of the owner’s estate has expressed interest in the asset for at least three years prior
• Any other natural person who holds an ownership interest also has been confirmed deceased

Crowe observation

This approach represents a fundamental departure from current activity-based concepts by treating death, rather than silence, inactivity, or returned mail, as the primary indicator that property truly is ownerless.

For joint accounts, the requirement that all natural-person owners be confirmed deceased significantly strengthens protections against premature transfer.

For covered assets held or beneficially owned by an entity or person other than a natural person, the bill preserves a contact-based framework by permitting transfer after five years if the custodian has no record of contact from a representative.

Covered assets

The bill defines the term “covered assets” to include securities, digital assets, and investment accounts, and the bill extends to associated economic rights such as dividends, principal payments, forks, and airdrops. The bill’s definition of “investment account” expressly includes retirement accounts (except employee benefit plans under Title 1 of the Employee Retirement Income Security Act of 1974) as well as any account used to hold, manage, buy, sell, or trade a security or digital asset. The bill also defines “digital asset” as any digital representation of value that is recorded on a cryptographically secured distributed ledger or similar technology. For the definition of “financial institution,” the bill uses the definition under 31 U.S.C. Section 5312, and specifically includes national banks, transfer agents, and centralized digital asset exchanges.

Mandatory death verification

The bill provides a mandatory death verification for covered assets owned by natural persons who have reached retirement age under Section 401(a)(9)(C)(v). The proposed rule would require the custodian to compare its records against a state or federal death database to determine whether the owner is deceased after five years of no contact and every five years thereafter.

Currently, most state unclaimed property statutes do not require holders to conduct death-database searches before reporting dormant property.

Federal preemption

The SAFER Act includes broad federal preemption language. However, it clarifies that the bill does not preempt state requirements concerning communication between the state and the holder or owner, and it does not limit the owners’ ability to seek state or federal escheatment remedies.

Looking ahead

If enacted, the SAFER Act would require financial institutions to reassess unclaimed property compliance processes for covered assets to:

• Clearly distinguish between covered assets owned by natural persons and covered assets owned by entities and persons other than natural persons
• Implement or enhance death-verification procedures
• Track and document estate-level expressions of interest
• Establish recurring database checks for older inactive accounts

The proposal reflects a growing policy debate over the treatment of retirement assets, digital assets, and long-term investment holdings within traditional unclaimed property frameworks. Even if the SAFER Act does not advance in its current form, financial institutions should expect continued legislative and regulatory activity at both the state and federal levels, including potential amendments to dormancy standards, reporting obligations, and custodial requirements for digital and investment assets.

Until the bill’s prospects become clearer, affected institutions should consult their advisers to monitor legislative developments, assess operational gaps, and consider how a death-based federal escheatment standard would interact with existing state unclaimed property regimes.