It's not uncommon for people looking at state gift card laws to ask: what does escheat mean? In this post, I'll cover some of the basics surround gift cards and escheatment laws.
In short, escheat is a common law doctrine that operates to ensure that property is not left in limbo and ownerless. Basically, a state will determine the type and time frame for property to be considered abandoned or unclaimed. It's the responsibility of the property holder to report and turnover the unclaimed property to the state.
Escheat laws make a lot of sense; they've been around for a long time and cover a wide range of property. From bank accounts, to stocks and even tangible property such as land. Once a state acquires the unclaimed property through escheatment, the rightful owner can claim the property from the state. In fact, many states have unclaimed property searches accessible online.
Do Gift Cards Escheat In My State?
Depending on your state's gift cards laws, they may fall under unclaimed property laws subject to escheat. In fact, some state's like New Jersey have very aggressive laws for claiming the value on gift card, just 2 years. Other states, like California have specifically stated gift cards are not considered unclaimed property subject to escheat. When evaluating a state's gift card laws, ScripSmart's algorithm lowers the state's State Law Grade when they considers gift cards to be unclaimed property. Here is a cheat sheet for gift cards and uncalimed property.
Why Does ScripSmart Think Gift Cards Should Not Escheat?
While it's understandable state lawmakers do not want a company who issued the gift card to benefit when gift cards go unredeemed, we think it's a bad idea to subject gift cards to such laws. Here are a few reasons why:
- The true owner's address is often an unknown - Due to the nature of gift cards, the person who owns the gift card is rarely the person who purchased the gift card. In fact, they might not even live in the same state as where the gift card was purchased. This is problematic because states often define which property is unclaimed based on the owner's address and if that address is unknown, it's often assume the owner is within the state which it was purchased.
- Turing the value of a gift card over to the state essential expires the gift card - Even if it's against state or federal laws to expire gift cards the value is no longer held by the card issuer. For example, New Jersey wants the money after just 2 years and that's 3 years shorter than the federal minimum for expiration dates (5 years)!
- It's unlikely to be claimed - Because gift cards are gifts, it's unlikely the true owner can go to a the state and search by their name. This makes it difficult for the owner to claim the property from the state. In other words, the state is really the one who benefits from unclaimed gift cards, not consumers.
Suggestiong For State Laws
There may be instances where excluding gift cards as unclaimed property hurts consumers. For example, there are no states which require lost gift cards be replaced (even for a fee) and if a gift card becomes lost and the gift card issuer does not replace the gift card,that consumer is out of luck and will never have the option of claiming the money from the state.
Thankfully there are several companies out there who offer a reasonable replacement policy. And ScripSmart can help you find them, it's also a factor in each Gift Card Score. When looking at a gift card grid on ScripSmart, you can sort by specific attributes. Just click on the column header and look for green checkers. For example, here is a list of the best restaurant gift cards.