7.24.2007

California wants to steal your assets

This is just sickening:

Escheat is a feudal concept that arose from the despotism of the Dark Ages. It stemmed from the principle that property rights depend upon the sufferance of the sovereign, and when a person dies or disappears without heirs, his property reverts to the feudal lord.

California revived this medieval doctrine in 1959 and began seizing personal assets on the smarmy pretext that after a few years of account or safe-deposit box inactivity, property is obviously "lost," and the state needs to "protect" it by selling it off and depositing the proceeds into the general fund.

Today in California, no one's property is safe. When a family sets aside an investment for college or retirement, it may be in for a nasty surprise just three years later. After a lifetime running a small shop, Benny and Sally Fong could have retired on their shares of Warren Buffett's holding company, Berkshire Hathaway, that had grown in value to more than $1 million. But when they tried to redeem their nest egg, they discovered the state Controller's Office had sold the shares – for just $171,000.

When a widow returns to her bank safe deposit box after several years to retrieve her precious heirlooms, she is likely to discover that the controller has already looted it, shredded her family photos and auctioned off anything of monetary value. That's exactly what happened to Carla Ruff, whose great-grandmother's jewelry (appraised at more than $80,000) was taken straight out of her safe deposit box by the controller and sold on eBay for $1,700. Critical financial documents she desperately needed to prepare her dying husband's estate had been shredded.

Don't expect the "protector" of your "lost" property to be glad to see you when you try to redeem what's left. Anne Smith (not her real name) has been trying to reclaim checks the state intercepted from her mother's estate in 2001. After she spent years meticulously documenting her rightful ownership, two months ago the Controller's Office told her she wouldn't get her money back until the company turned over its complete database so the controller could search for additional property to take.

Particularly for claims over $5,000, the controller's office is notorious for stonewalling. When Ronald Repass tried to recover stocks taken from his father's estate – despite notifying the controller beforehand that the stocks weren't abandoned – he was warned that it would take 12 to 18 months to process his claim, and any inquiries would restart the clock. When he finally called after two years of waiting, he was told his claim had been "misplaced."

Controller John Chiang maintains that he's shocked, just-shocked, that his office has been behaving in such a manner, and he wants to do everything he can to set things right, except, apparently, if it reduces the state's revenue. In March, Chiang vigorously opposed legislation to lengthen the escheat period – how long the state must wait before grabbing assets – and to require at least three notices to owners before their property is taken. He is currently sponsoring legislation that would allow him to comb through confidential tax records in search of additional property to seize.

This happened to relatives of mine, when the accounts in question still had their current, accurate mailing address on file. It's going to be a bureaucratic nightmare to get their money back from the kleptomaniac State of California.

You can search for confiscated accounts here.

California residents are advised to use non-California addresses for their bank and brokerage accounts. And for God's sakes, never use a safe deposit box for anything important in California.

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