Investors can unintentionally forfeit their mutual fund accounts to state governments by not staying in contact with the mutual fund company. According to the Investment Company Institute (ICI), a state can deem a shareholder as being “lost” and claim the account’s assets if certain conditions are met.

Laws vary, but there are two general ways in which this could occur. The first is if first-class mail sent to the shareholder is returned to the mutual fund company as being ‘undeliverable.’ The second is if no contact occurs between the investor and the mutual fund company for a certain period of time.

The ICI describes the ‘no contact’ standard as applying when an investor fails to contact the mutual fund company regarding his or her account once every three, five or seven years. The actual time period varies by state. Importantly, the ICI says, “automated features on an account (such as regular, ongoing purchases or redemptions, or reinvestment of dividends) do not necessarily count as contact, so such activity might not protect a shareholder’s account from state escheatment laws.”

Due to this risk, investors should contact all of the financial institutions they work with—banks, brokerage firms, mutual fund firms, IRA providers, credit unions, etc.—once a year. If there is no particular reason to call them, simply ask to confirm your contact and beneficiary information. The ICI suggests cashing all dividend checks, reviewing all mail sent from financial institutions and voting proxy statements.

Mutual fund companies are required by the Securities and Exchange Commission (SEC) to use at least two national databases to contact shareholders in order to find a valid address. Nonetheless, it is the responsibility of investors to ensure their contact information is updated with all financial institutions.

The National Association of Unclaimed Property Administrators (www.unclaimed.org) has a free search engine to find lost property claimed by states. It is also very helpful to check the databases of each state you have lived in as well as the states where your financial institutions are organized. In the case of mutual funds, the ICI suggests checking Maryland, Massachusetts and Delaware since most are organized under the laws of these states.

Source: “Frequently Asked Questions About Lost Property,” Investment Company Institute, www.ici.org.