Does Unclaimed Money Draw Interest?

Money and other property can go unclaimed for a variety of reasons--sometimes for years. In some cases, interest accrues and may eventually be credited to the rightful recipient of the money. In other instances, no interest at all accrues, and the eventual recipient is not entitled to anything other than the original principal.

Certain savings bonds cease to accrue interest, and the money can sit idly in the Treasury forever unless the bonds are cashed out by the bondholder. Each year, the Treasury lists up to 15,000 bonds and 25,000 interest payments as not deliverable, meaning they cannot locate the rightful bond holder. Once your savings bond matures, it will cease to earn interest. But only Series H and HH bondholders receive a notice from the Treasury. Other bonds will simply cease interest payments, if any payments were payable, or the bond will simply cease to grow in value.

When state governments come into possession of unclaimed property or money, then state laws apply. These laws can vary widely, though as state budgets tighten, state legislatures have been looking to seizure of unclaimed property to help them balance their budgets. This means that state governments have been cutting back on their willingness to pay interest to the rightful owners of unclaimed property and have sharply shortened the period of time after which the state may deem property to be abandoned.

When a life insurance company is unable to pay a death claim because it cannot locate the beneficiary, it will hold the money in the general account of the insurance company and credit the policy an interest rate as defined by state law. Again, this interest rate varies by state, but it is generally high enough to provide the insurance company with a vested interest in finding the beneficiary quickly. For example, the state of New York specifies that interest on unpaid life insurance benefits be compounded daily.

Eventually, the beneficiary of unclaimed property loses all title to the asset, including both interest and principal payments. The time after which the beneficiary's claim to the asset or property expires varies by state law.

You may be able to track down mature savings bonds by contacting the U.S. Treasury directly. To locate an unclaimed life insurance policy or death benefit, you can use the policy locator service at the Medical Information Bureau. And to locate unclaimed property being held by state governments, you can contact your state's office of unclaimed property via the links provided in the Resources section.