Due diligence is a critical step in the unclaimed property reporting process that many small businesses overlook or misunderstand. This mandatory outreach involves contacting potential property owners before remitting their assets to the state as unclaimed property, serving both legal compliance and customer service purposes.
Understanding Due Diligence
For small and medium-sized businesses, proper due diligence accomplishes several important goals. First, it fulfills legal requirements mandated by most state unclaimed property laws. States require written notices to property owners for amounts exceeding certain values (typically $50-$100) to give owners a final opportunity to claim their property before escheatment.
Second, successful due diligence helps maintain positive relationships with customers, vendors, and employees by providing them opportunities to recover forgotten assets. This proactive communication often strengthens business relationships and demonstrates good faith efforts to return rightful property.
Third, effective due diligence reduces your reporting burden. Every property owner who responds and claims their assets means less property to report and remit to state unclaimed property offices, reducing your administrative workload and compliance costs.
When to Send Due Diligence Letters
Due diligence letters must be sent within specific timeframes before your reporting deadline, typically 60-120 days prior depending on state requirements. This timing allows property owners adequate opportunity to respond while giving your business sufficient time to process responses before filing deadlines.
Your unclaimed property due diligence communications should include several essential elements:
- Clear identification of the property type and value
- Specific instructions for preventing escheatment to the state
- Explicit notice that property will transfer to state custody if unclaimed
- Reasonable response deadline (typically 30-60 days from mailing)
- Complete contact information for your business
- Reference numbers or identifiers to help process responses efficiently
For small businesses with limited resources, due diligence can be streamlined through careful planning. Develop standard letter templates that comply with your applicable state requirements. Many states provide sample due diligence letters on their unclaimed property websites.
Maintain detailed records of all due diligence efforts, including copies of letters sent, mailing dates, delivery confirmations when available, and any responses received. This documentation protects your company during potential unclaimed property audits by demonstrating good faith compliance efforts.
Consider using certified mail or other trackable delivery methods for high-value items to ensure proper delivery and maintain proof of your due diligence efforts. While this adds cost, it provides valuable audit protection for significant unclaimed property amounts.
Track responses carefully and remove claimed items from your final unclaimed property reports. Including “cured” items that owners claimed during due diligence creates compliance problems and duplicate records in state systems.
How to Simplify Due Diligence
While due diligence adds another step to the unclaimed property process, it’s ultimately beneficial for SMBs. Successful owner reunification means fewer reporting obligations, reduced compliance costs, and stronger stakeholder relationships—making the investment in proper due diligence worthwhile for small businesses committed to unclaimed property compliance.
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