The Supreme Court’s 1965 decision in Texas v. New Jersey set the priority rules that still decide which state can claim unclaimed property such as uncashed checks, forgotten dividends, and unpaid wages. Two rules govern. First, the state of the owner’s last known address, as shown on the holder’s books, has the first right to take custody. Second, if no address is on file (or the address state has no law reaching that property), the state where the holding company is incorporated claims the funds as a fallback.1Justia. Texas v. New Jersey, 379 U.S. 674 (1965)
The case arose from a fight among Texas, New Jersey, Pennsylvania, and Florida over small debts that Sun Oil Company had carried on its books for years, sometimes decades. Sun Oil did not want the money. It wanted to hand it over once and be done. The Court’s answer set the pattern for every state unclaimed property program that followed.
The Primary Rule: State of the Owner’s Last Known Address
When intangible property goes unclaimed, the state where the creditor’s last known address appears in the holder’s records has the first right to take it. The Court’s reasoning was practical. If the creditor had cashed the check and kept the cash, only the state where the creditor lived could ever have claimed it. Treating the uncashed debt the same way keeps the rule aligned with the economic reality.1Justia. Texas v. New Jersey, 379 U.S. 674 (1965)
Tying priority to the address on the holder’s books, rather than to concepts like domicile or the location of the transaction, also keeps compliance simple. A company can look at its own mailing records to figure out which state has the primary claim without investigating where a creditor technically resides.1Justia. Texas v. New Jersey, 379 U.S. 674 (1965)
The address has to be usable. It must be good enough to deliver first-class mail. A full street address obviously qualifies. Whether a zip code alone or a partial entry meets the standard depends on whether it could actually reach the person. If the holder’s records show the address is invalid, because mail has come back undeliverable, the primary rule may not apply, and the property drops down to the secondary rule.
When the Rule Starts to Run
The priority rules only kick in once property is considered abandoned under state law, and each state sets its own timeline. Dormancy periods range from about one to fifteen years depending on the property type and the state. The clock generally starts from the last time the owner showed any sign of interest: the last transaction, the last login, the last piece of correspondence. Life insurance proceeds vary further; some states start the clock at the date of death while others wait until the insurer receives notice. Those variations decide when a holder’s reporting duty begins.
The Secondary Rule: State of Incorporation
Not every creditor has an address on file. The Court identified two situations where the primary rule fails: the holder has no address at all, or the address on file points to a state whose laws do not reach that kind of property. In either case, the right to take custody shifts to the state where the holding company is incorporated.1Justia. Texas v. New Jersey, 379 U.S. 674 (1965)
This fallback is provisional. The state of incorporation holds the property only until another state comes forward with proof of a superior claim. If a state later shows that the owner’s last known address was within its borders, or if the address state passes a law reaching that property type, it can recover the funds. The incorporating state’s authority, the Court said, is to “cut off the claims of private persons only.”1Justia. Texas v. New Jersey, 379 U.S. 674 (1965)
Delaware has been a major beneficiary of this rule because so many American corporations are incorporated there. When companies fail to maintain address records, which happens routinely, the funds default to Delaware. That dynamic drove later litigation and eventually prompted Congress to act for certain financial instruments.
Foreign Addresses
When the owner’s last known address is in a foreign country, the primary rule effectively has nowhere to send the property. Most foreign nations either lack unclaimed property laws or do not claim funds held by U.S. companies. In practice, property with a foreign address usually falls to the secondary rule and escheats to the holder’s state of incorporation.
Protection for Holders Against Double Liability
Sun Oil’s only concern was avoiding the prospect of paying the same debt twice, or three times, to competing states. The Court addressed that head on. Once a holder turns over unclaimed property to a state under the priority rules, that state must defend the holder against any later claims from other states or from the original owner.2Justia. Texas v. New Jersey, 380 U.S. 518 (1965)
If a second state later proves it has a superior claim, the two states resolve the dispute between themselves. The company that turned over the funds is out of it. Without that protection, businesses holding thousands of small dormant accounts would face an impossible task defending their escheatment decisions against every state that disagreed. Most states have since codified this protection, requiring the state that received the property to indemnify the holder against losses and legal costs from competing claims.
Where Congress Overrode the Rules: Money Orders and Traveler’s Checks
The secondary rule’s tendency to funnel funds to incorporating states created a problem the Court itself acknowledged. Companies that issue money orders and traveler’s checks rarely record a buyer’s address. With almost no addresses on file, the primary rule almost never applied to these instruments, and the unclaimed funds nearly always ended up in the issuer’s state of incorporation.
Congress responded with the Disposition of Abandoned Money Orders and Traveler’s Checks Act, which replaces the Texas v. New Jersey framework for those specific instruments. Under the federal statute, the state where the money order or traveler’s check was purchased has the first right to escheat unclaimed funds, provided the holder’s records show the state of purchase. If those records do not show the state of purchase, the funds go to the state where the issuer has its principal place of business, not the state of incorporation, until another state proves it was the purchase state.3Office of the Law Revision Counsel. 12 U.S. Code 2503 – State Entitlement to Escheat or Custody
The Act’s logic is straightforward. The state where a person walked into a store and bought a money order has a stronger connection to the transaction than the state where the issuing company happens to be incorporated.
How Delaware v. Pennsylvania Extended That Boundary
The line between the common-law rules and the federal Act was tested nearly sixty years later in Delaware v. Pennsylvania. The dispute centered on unclaimed Agent Checks and Teller’s Checks issued through MoneyGram’s network. Delaware, as MoneyGram’s state of incorporation, argued these instruments were bank checks outside the federal statute, which would send the funds to Delaware under the secondary rule. Pennsylvania and Wisconsin argued the instruments functioned like money orders and fell within the Act.4Legal Information Institute (Cornell Law School). Delaware v. Pennsylvania
The Court sided with Pennsylvania and Wisconsin. It held that MoneyGram’s checks were “sufficiently similar” to money orders to fall under the federal statute. The instruments worked the same way, as prepaid products used to send a fixed amount to a named payee, and MoneyGram did not keep records of buyer addresses. Applying the common-law rules would have produced exactly the kind of windfall to the incorporating state that Congress intended the Act to prevent.4Legal Information Institute (Cornell Law School). Delaware v. Pennsylvania
The practical effect: rather than billions in unclaimed MoneyGram funds flowing to Delaware, they now escheat to the states where the instruments were actually sold.
What This Means for Businesses Holding Unclaimed Property
The priority rules translate directly into compliance obligations for every business that holds property belonging to others. Companies must maintain accurate address records for customers, employees, vendors, and shareholders. The quality of those records determines which state has the right to claim abandoned funds. Poor record-keeping does not let a company keep the money. It shifts the funds from the state where the owner likely lives to the state where the company is incorporated.
State auditors enforce these rules aggressively. Lookback periods often extend twenty or thirty years, and auditors scrutinize whether addresses were properly maintained during that entire window. When addresses are missing, the incorporating state collects the funds along with any accumulated interest. Penalties for late or incomplete reporting range from modest per-day fees to significant civil penalties, depending on whether the failure appears intentional.
Digital assets have added new complexity. Several states have passed laws that specifically address dormant cryptocurrency and other digital-only assets, defining them as property subject to escheatment after a set dormancy period. The priority framework applies the same way: the state of the owner’s last known address claims first, the state of incorporation claims second. Holders of digital assets face open questions about what counts as an “address” and what activity resets the dormancy clock, questions the Court in 1965 could not have anticipated but that its framework is now being stretched to answer.