States Risk Penalizing Long-Term Investors Through Inactivity Laws

When a state declares an account abandoned, it seizes and sells the underlying assets. While investors can later file claims to recover their property, they often receive only the cash value at the time of liquidation. This process strips them of years of dividends, interest, and market appreciation. In a hypothetical scenario involving a $50,000 portfolio, an investor who remains inactive for a decade could lose nearly $50,000 in potential growth—a penalty for doing nothing more than holding their investments.

Florida recently corrected this oversight. After a 2024 shift toward an inactivity standard led to over $1 billion in premature asset seizures, Governor Ron DeSantis signed legislation this June to restore protections for reachable investors. The new law mandates a 10-year period of inactivity before an account can be considered abandoned and accepts digital engagement, such as mobile app access, as proof of ownership.

California now faces a similar crossroad. Assemblywoman Cottie Petrie-Norris has introduced AB 2031, which aims to clarify the state’s unclaimed property statutes to prevent the inappropriate liquidation of accounts where the owner remains reachable. By adopting these reforms, California could safeguard the interests of its 7.8 million households currently invested in mutual funds and ETFs, ensuring that long-term financial planning is no longer penalized by outdated regulatory standards.