From my father Bob Bauman, I inherited an affinity for the great American vaudeville and film comic, W.C. Fields. For those who remember him, W.C. is best known for his drinking habits and his creative partnership with another great star of his era, Mae West — she of “come up and see me some time” fame.
W.C.’s unique brand of humor — like that of the Marx Brothers, my appreciation for which signifies another Bauman idiosyncrasy — is rooted in a healthy disdain for convention and distrust of authority. But W.C. was like many of us in another way: he practiced a sound asset protection strategy.
You see, W.C. was in the habit of making small deposits — a few hundred dollars, say — at local banks in towns where he performed during his vaudeville days. His years of show business experience taught him that unscrupulous promoters, agents and the taxman could easily leave a traveling minstrel like him high and dry, financially speaking. And that would leave him dry in other ways as well.
But W.C. is surely turning in his grave, for in today’s America, all of that careful preparation would have been for naught: the government would just have taken his money for itself.
I had no idea — until I read about a similar system in Australia — that all 50 U.S. states now have laws on the books that allow them to seize “dormant” assets from their owners. These assets range from uncashed dividend checks to safe deposit boxes to actual bank accounts. Banks and other businesses are required to turn that property over to the states for “safekeeping.”
The problem is that states return less than a quarter of this supposedly “unclaimed” property to its rightful owners. One of the most egregious is California. California law used to say assets were unclaimed if the owner had no contact with the business for 15 years. But during various state budget crises, the waiting period was reduced to seven years, then five, then three. Legislators even tried for one year.
Some states — such as Oregon, Colorado, Missouri, Iowa and Kansas — keep their unclaimed property in a special trust fund and only tap into the interest. Many, including my native Maryland, use tax databases to track down the rightful owners. But California dumps the money into the general fund — and spends it. The Golden State became so addicted to spending people’s “gold,” as it were, that for years it simply stopped sending notices to the rightful owners.
Some of these cases of state-sanctioned theft are shocking even to jaded observers like me.
A British resident who bought $4 million in U.S. stock to fund his retirement found it had been seized and sold for $200,000 years earlier — even though he was regularly in touch with his broker. A Sacramento family lost railroad land rights their ancestors had owned for generations, sold off as unclaimed property.But the cake-taking story belongs to San Francisco-resident Carla Ruff. Her Bank of America safe-deposit box was drilled, seized and turned over to the state, marked “owner unknown.” She discovered the loss when she went to open it to retrieve important paperwork she needed because her husband was dying. The papers had been shredded. And her great-grandmother’s natural pearls and other jewelry had been auctioned off — for $1,800, even though they were appraised for $82,500.
California isn’t the only state to operate a legally-sanctioned theft racket. All 50 states pay private contractors commissions to locate and seize accounts for them. It’s a classic conflict of interest: the more rightful owners are found, the less money the contractors make. But the states have the biggest conflict of interest of all. In Delaware, unclaimed property is the third largest source of state revenue.
What Would W.C. Do?
Were he alive today, W.C. Fields would need to pause between shots of whisky to do the following:
Ted Bauman is an Offshore and Asset Protection Editor who joined The Sovereign Society in 2013. As an expat who lived in South Africa for 25 years, Ted specializes in asset protection and international migration. He is the editor of Offshore Confidential and Plan B Club. His writing is featured at The Sovereign Investor, where this article first appeared. For more information about how to protect your assets, please visit:http://pro.sovereignsociety.com/SVS911/WSVSQ412/?h=true
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