Escheat is the government’s right to take ownership of unclaimed real estate or assets. Escheat is a government power granted by the constitution, and part of the reason it’s critical to have a will, but more on that later.
What is Escheat?
Definition: The governments right to take ownership of unclaimed real estate or assets.
So what does that mean? Well, when a property owner dies and leaves no proper documented inheritance plan, the property ownership reverts to the government. That is escheat. Escheat ensures that property always has ownership.
Escheat is part of the reason it’s critical to have a will, or when you are purchasing property, you establish an explicit right to survivorship.
The good news is that certain property that is escheated may later be reclaimed. Obviously, it depends on the instance, and the state, but recovering property is possible in some circumstances.
Here is a quick and easy example.
Imagine an elderly man in a nursing home. He has no family and is suffering from Alzheimer’s. Because of his Alzheimers, he doesn’t remember much. Eventually, he passes away in his sleep. There is no will for the man, and again he has no family. So what happens to the money left in his savings account or his old farm that has been left untouched since he entered the nursing home?
Instead of being handed down to his family(since he has none), his assets (farm included) are going to go to the government in the process called escheat.
As sad as this example may be, it’s a process that must be defined and established just in case matters like that happen.
What to Know for the Real Estate Exam
Well, as you know, in the United States, every state is different, and escheat is no expectation. Each state has different rules and regulations governing escheat and how it functions. It’s super important to understand how your state operates when it comes to escheat.
Understanding the basics of escheat is critical for exam day. An example of what you might see on exam day is a question describing a situation where someone passes away, doesn’t have any heirs or family, and it’ll ask you what happens next? Obviously, the correct answer would be escheat.