When property is abandoned, ownership of the property escheats (reverts) to the state. The common law doctrine of escheat originated in feudal England. When a land owner (tenant of a fief) died without an heir or committed a felony, some mechanism was needed for the ownership of the land to automatically revert to the immediately superior feudal lord. With a smooth and quick transfer of ownership, the king was assured of continued productive use of the land, especially an uninterrupted revenue stream up the feudal chain.
Though a long way from its origins in feudalism, the application of escheat principles is still alive and well today. With reversion of property by operation of law, government entities ensure that property does not remain in limbo and continues to be put to some use.
There are two main scenarios where escheat comes up today. The first situation involves the transfer of a deceased person's property to the state when the person dies without a will and there are no heirs available to take the property. In such cases, property reverts to the state as a last resort.
The second major area where escheat pops up, and the topic of lengthy discussion here, involves unclaimed property. Various entities, such as financial institutions, employers, and retail establishments, often hold money or property that for one reason or another goes unclaimed. In such cases, the unclaimed property must be turned over to the government after a set period of time if the owner cannot be located.
Each government entity holding unclaimed property has mechanisms in place to try and locate the rightful owners and return their property. Unfortunately, most of the collected unclaimed property continues to remain unclaimed. Meanwhile, the government gets to use billions of dollars worth of property until somebody can make a claim for its recovery.
For additional background information on this topic, please read the following sections: