Somewhere in your outstanding items list, there are checks that have been sitting there for months. Maybe years. A $847 check to a county recorder's office that was never cashed. A $2,100 earnest money refund that the buyer never deposited. A $315 recording fee from a closing that settled eleven months ago.
You know they're there. You see them every time you reconcile. They've become part of the furniture — line items you scroll past on the way to the numbers that matter. The reconciliation still balances because the outstanding checks are accounted for in the adjusted bank balance calculation. No variance. No exception. No urgency.
Until the auditor asks about them. Or until your state's escheatment deadline passes and you're holding funds you were legally required to turn over.
What escheatment is and why it matters
Escheatment — also called unclaimed property law — requires holders of dormant assets to turn those assets over to the state after a specified period of inactivity. The holder in this case is your agency. The assets are the funds represented by those uncashed checks sitting in your trust account. The state considers them unclaimed property once they exceed the dormancy period.
Every state has escheatment laws. The dormancy periods vary — typically one to five years for checks, depending on the state and the type of payment. Some states require a shorter period for payroll checks and a longer period for other instruments. The reporting and remittance requirements also vary: annual filings, specific reporting forms, due diligence requirements to contact the payee before escheating.
The penalties for non-compliance are real. States conduct escheatment audits — and they're increasingly aggressive about them. Penalties can include interest on the unreported property, fines for late reporting, and in some states, criminal penalties for willful non-compliance. For a title agency holding trust funds, escheatment non-compliance is a regulatory risk that sits alongside reconciliation failures and segregation of duties violations.
Why agencies fall behind
The operational reality is that nobody wakes up in the morning thinking about escheatment. It's not urgent until it's past due. And the tracking requirements are surprisingly complex:
Multiple states, multiple deadlines. If your agency closes transactions involving parties in different states, the applicable escheatment law may be the state of the payee's last known address — not your state. An agency in Texas doing closings with parties in Oklahoma, New Mexico, and Louisiana may have four different sets of escheatment rules to track.
Due diligence requirements. Before you can escheat funds, most states require you to make a reasonable effort to contact the payee. This typically means sending a letter to the last known address 60 to 90 days before the reporting deadline. If you're tracking stale checks in a spreadsheet, the due diligence trigger dates aren't automated — someone has to manually review the outstanding items list, identify which ones are approaching the threshold, determine the applicable state, calculate the due diligence window, and send the letters.
The volume compounds. A high-volume agency might issue hundreds of checks per month. Over time, the outstanding items list grows — not because the agency is doing anything wrong, but because a small percentage of checks in any population simply never get cashed. If the tracking isn't systematic, the list becomes unmanageable and items slip past the escheatment deadline without anyone noticing.
What the auditor looks for
When an underwriter examiner reviews your reconciliation records, they're not just checking the three-way match. They're looking at your outstanding items schedule — specifically:
- How many items are on the list
- How old the oldest items are
- Whether items exceeding 90 days have been flagged for review
- Whether items approaching the state escheatment threshold have a documented disposition plan
- Whether any items have already exceeded the escheatment deadline
A reconciliation that balances perfectly but has 23 outstanding checks older than six months with no aging analysis and no escheatment tracking is a finding. The reconciliation math is correct, but the operational controls around stale items are missing.
The reissuance question
For many stale checks, the right answer is reissuance — void the original check and issue a new one. The county recorder's $847 check that's been outstanding for 90 days probably needs to be reissued because the recording still needs to happen. The buyer's $2,100 earnest money refund that's been outstanding for six months may need a new check sent to an updated address.
But reissuance has its own requirements. You need to verify the original check hasn't been cashed (a stop payment may be necessary). You need to void the original in your books. You need to issue the replacement and update the outstanding items schedule. And you need to document the entire chain — why the original was stale, what attempts were made to contact the payee, when the replacement was issued.
Without systematic tracking, reissuance decisions are ad hoc — someone notices an old check during reconciliation and decides to deal with it. That's not a control. That's luck.
Systematic tracking
The solution isn't complicated in concept. It's difficult in execution without automation:
Age every outstanding item automatically. Every check, wire, and ACH on the outstanding items list should have a running age in days, calculated from the issue date. No manual counting. No spreadsheet formulas that break when someone inserts a row.
Configure thresholds by state. Set the escheatment dormancy period for each applicable state. When an item crosses a configurable warning threshold (e.g., 60 days before the escheatment deadline), trigger an alert. When it crosses the due diligence window, trigger another.
Surface stale items in the daily reconciliation. The morning briefing shouldn't just tell you the accounts balance — it should tell you that check #4821 to the County Recorder is approaching 60 days outstanding and is worth monitoring. This information should appear in context, not in a separate report that someone has to remember to run.
Document the disposition. When a stale check is voided, reissued, or escheated, the action and the reason should be recorded in the same evidence chain as the reconciliation. The auditor should be able to trace the entire lifecycle of any outstanding item from issuance to disposition.
Escheatment compliance is not glamorous work. It does not inspire product demos or generate marketing excitement. But it's a legal obligation that carries real consequences — and it's the kind of operational detail that separates agencies with mature trust account controls from agencies that are one audit away from a finding they didn't see coming.