Our son-in-law passed away four years ago. We recently heard from a reputable recovery firm that they’ve located an unclaimed IRA of his. They’re not asking for money up front — just permission to take their commission from the account upon transfer. Can they take money from an IRA as payment? We checked in every institution and state that could be holding funds in his name, and found none. Would IRAs be held as unclaimed funds in a different location than unclaimed bank money?
No. Any financial account that’s been inactive for five years (three years, in some states) can be declared abandoned. The institution holding the account must then advertise for the owner. If none appears, the account goes to the state controller’s office, where the owner can still claim it, free of charge.
Recovery companies can alert owners about an inactive account before it’s turned over to the state. They charge a commission, typically a percentage of the unclaimed asset. The client must sign a contract agreeing to pay the commission before the company tells him or her where to find the account.
In this case, the IRA beneficiary — presumably your daughter — could pay the commission from the IRA or from other funds.
One warning: Recovery companies expect payment even when it turns out the owner already knows about the inactive account. This happens. (An account may be deemed “inactive” because the post office once mistakenly rejected mail addressed to the owner, for example.) Before signing a contract, you could list your son-in-law’s known IRAs and ask the company to affirm that this isn’t one of them. Or you could opt instead to wait a year, and then check again with state offices for unclaimed money.
THE BOTTOM LINE The owners of abandoned accounts can still claim them.