New York Abandoned Property Regulation (NY 2 NYCRR 126.1) – Mandated Death Validation

The State of New York has enacted a new Abandoned Property regulation that requires all holders to validate a death within 90 days of that holder becoming aware of the death. Upon confirmation of the death, the applicable dormancy period commences retroactive to the date of death. 

On March 23rd, 2023, the State of New York enacted legislation mandating property holders to perform death validations on customers for which a notification of death has been received through their normal course of business. While often the natural means through which a holder becomes aware of a customer’s death is through contact from the next-of-kin to whom the assets will be transferred, there are other circumstances through which a holder can become aware of a death. These other circumstances, including Returned Post Office mail death indication, next-of-kin contact who are not entitled to the asset, internal decedent processes, and other means all create an obligation to validate that the customer is, in fact, deceased.
 
The statute is vague and leaves room for companies to interpret what constitutes validation, and how best to address this requirement. While companies will have latitude in how they respond, creating an effective process to respond to this requirement will be critical. The regulation defines that the applicable dormancy period will begin retroactive to the date of death, regardless of when companies become aware of the death. This creates a significant compliance risk by which holders who are notified and confirm a death multiple years after the death occurred, may be beholden to an expired dormancy period. The escheatment of the added past-due populations increases audit risks and creates the opportunity for significant fines and interest payments related to late reporting of assets. 

What This Means for Your Organization

Prior to the new regulation being implemented, holders across most industries were not required to perform a death validation of an owner who was potentially deceased. The new law may create the following pain points within your organization:

• The need to operationalize validation requirements. The Social Security Administration’s Death Master File (DMF) no longer provides adequate coverage of nationwide deaths (~25% nationwide coverage). With this limitation, validation processes solely dependent on the DMF may not be sufficient, creating significant operational complexities and financial risks.
• Added difficulty with accurately tracking dormancy for New York reportable property types.
• Increased audit risk due to unfamiliarity with automated techniques to confirm death quickly and accurately.
• Potential penalties and interest for late property reporting if an owner has been deceased for an extended period of time.   

Key Considerations 

Companies who perform scheduled death audits to accurately validate deceased owner populations on potential unclaimed property items, not only mitigate their firm’s compliance risks with the State of New York but also risks nationwide in the event that this regulation is enacted across multiple jurisdictions. Death validation searches that incorporate multiple sources (e.g., state vital statistics) can increase the accuracy of confirming a deceased owner’s information, such as date of death, which will satisfy the intent of the new regulation. 

How Can Guidehouse Help

Many companies are now beginning discussions on how to operationalize their response to these new obligations. Guidehouse has more than a decade of experience assisting companies with identifying and validating deceased owners. Our solution captures 98% of nationwide deaths on an annual basis. We have a long history of advising clients on industry best practices in the decedent space, and work with our clients to develop a customized solution that meets varying and changing requirements across their business. Please reach out to Guidehouse experts to learn more about our solutions and how we can assist with maintaining unclaimed property compliance.

Authors: Alex DeFruscio and Michael Marron.