> ## Documentation Index
> Fetch the complete documentation index at: https://dso.getlemma.com/llms.txt
> Use this file to discover all available pages before exploring further.
# Handle uncashed checks and escheatment
> Stale patient refund and payroll checks, aged credit balances and orthodontic prepayments, due diligence letters, reporting and remitting unclaimed property to the state, and keeping the ledger from day one.
**Escheatment** is the process by which unclaimed property becomes reportable and payable to a state. For a dental group, that may include uncashed refund checks, unclaimed payroll, and aged credit balances. Every state has an unclaimed-property law, and audits can reach prior years.
Dentistry generates patient credits at an unusual rate: patients pay estimated portions at the chair before the claim adjudicates, orthodontic treatment is prepaid on payment plans that outlive transfers and dropped cases, and insurance sometimes pays more than the estimate assumed. Every one of those credits left unresolved is unclaimed property accruing.
Unclaimed property law is state-specific, and the rules on dormancy periods, due diligence, and reporting vary. Confirm the requirements for each state where you operate. This guide describes the framework.
## Prerequisites
* An uncashed-check ledger, start it before you issue your first check
* A credit balance process, see [Resolve credit balances](/guides/payments/resolve-credit-balances)
* Knowledge of which states you have property owners in
## What counts as unclaimed property
| Property | Common in healthcare |
| --------------------------------------------------------------------- | --------------------------------------------------------------------------- |
| **Uncashed patient refund checks** | The most common |
| **Uncashed payroll checks** | Departed employees |
| **Aged patient credit balances** where no refund was issued | Common sources include prepaid treatment plans and over-collected estimates |
| **Unearned orthodontic prepayments** after a transfer or dropped case | The ortho-specific version |
| Uncashed vendor payments | |
| Unclaimed payer overpayment refunds | |
| Unused gift certificates, membership plan credits, or account credits | Where offered |
**An unrefunded patient credit balance is unclaimed property even if you never issued a check.** Practices that leave credit balances on accounts indefinitely are accruing an unclaimed property liability, not avoiding one.
## Which state gets it
Governed by longstanding priority rules derived from US Supreme Court decisions on interstate escheat:1
1. **The state of the owner's last known address** in your records
2. If no address, or the address state has no applicable law, **the holder's state of incorporation**
Practical consequences for a DSO-PC group:
* Property is reported to the **patient's** state, not necessarily yours
* A multi-state group reports to multiple states
* **Address quality matters.** A missing or incorrect address can change which state receives the property and may default it to the entity's state of incorporation.
* Each **PC** is a separate holder with its own reporting obligation
## The pipeline
```mermaid theme={null}
graph LR
A[Check issued] --> B{Cashed?}
B -->|Yes| C[Done]
B -->|No, goes stale| D[Due diligence letter]
D --> E{Response?}
E -->|Yes| F[Reissue and resolve]
E -->|No| G[Dormancy period runs]
G --> H[Report and remit to the state]
```
## Steps
**This is the whole ballgame.** Record every check: number, amount, payee, payee's last known address, issue date, entity, and clear date.
Reconstructing this in year three, across multiple entities, from bank statements, is exactly the work a state unclaimed property audit will make you do, and audits routinely look back a decade or more. Starting the ledger costs nothing; reconstructing it costs weeks.
Match issued checks against cleared items. Anything outstanding past the stale date printed on your check stock, commonly 90 to 180 days, moves to the due diligence queue.
Cheaper and better for everyone than escheatment. Call, email, or text. Verify the address. Reissue if they simply never received it.
Most states **require** a written attempt to contact the owner before reporting, within a specified window before the reporting deadline, and often with prescribed content.
Send it to the last known address, retain a copy and proof of mailing, and record the date. States also frequently set a dollar threshold below which due diligence isn't required.
The dormancy period is the time property remains unclaimed before it must be reported. It varies **by state and property type**, and uncashed payroll often has a shorter period than other property.
See [Unclaimed property by state](/reference/banking/escheatment-by-state) for the framework, and confirm against each state's current statute.
Most states use a common reporting cycle with an annual deadline. Reports are filed electronically in a standard format, with the property remitted alongside.
File **per holder entity**, per state. Each PC files its own.
States typically require retention for a period after reporting, and an owner who later comes forward is directed to the state, but you may need to evidence what you reported.
## Voluntary disclosure
If you discover you have years of unreported property, which is common when a group first looks, most states offer a **voluntary disclosure agreement** program: you come forward, report the backlog, and typically receive penalty and interest relief.
**Voluntary disclosure is materially better than being audited.** Unclaimed property audits are frequently conducted by contingency-fee third-party auditors, look back many years, and use estimation where records are incomplete, which is why the ledger matters so much. If you have a backlog, take it to counsel and consider voluntary disclosure before an audit letter arrives.
## Multi-entity considerations
| Item | Implication |
| ----------------------------------------- | ------------------------------------------ |
| Each PC is a separate **holder** | Separate reporting obligation per entity |
| Reporting follows the **owner's** state | A Colorado PC may report to several states |
| Checks are drawn on **each PC's** account | Per-entity ledgers |
| Dormancy periods differ by state | Track per state per property type |
| A ten-PC group | Potentially dozens of state filings |
This is one of the quieter ways multi-entity overhead compounds, and one of the more common findings in diligence.
## Prevent it
The best escheatment process is a small one:
1. **Refund promptly.** Weekly credit balance review, resolution within 30 days.
2. **Refund to the original payment method** wherever possible. Card refunds do not become stale checks.
3. **Verify addresses** before mailing a check.
4. **Follow up on uncashed checks** at 30 and 60 days, before they go stale.
5. **Collect good contact information** at registration and keep it current.
## Verify it worked
* [ ] Uncashed-check ledger maintained from the first check, per entity
* [ ] Reconciled monthly
* [ ] Re-contact attempted before the stale date
* [ ] Due diligence letters sent per state requirements, with proof retained
* [ ] Dormancy periods tracked per state per property type
* [ ] Reports filed per holder entity, per state, by the deadline
* [ ] Aged credit balances included, not just issued checks
* [ ] Records retained after remitting
* [ ] Backlog, if any, discussed with counsel regarding voluntary disclosure
## Common failure modes
| Failure | Consequence |
| ---------------------------------------------- | ------------------------------------------------------- |
| No uncashed-check ledger | Reconstruction under audit, with estimation against you |
| Treating credit balances as not-yet-property | They are; the liability accrues |
| No due diligence letters | Statutory non-compliance |
| Reporting to your state instead of the owner's | Wrong jurisdiction; still liable |
| One filing for a multi-entity group | Each PC is a separate holder |
| Ignoring a backlog until audited | Penalties, interest, and estimation |
| Writing uncashed checks back to income | **This is not your money** |
## Sources
1. Interstate priority rules derive from *Texas v. New Jersey*, 379 U.S. 674 (1965), and subsequent cases. State unclaimed property administrators are indexed by the National Association of Unclaimed Property Administrators at [unclaimed.org](https://unclaimed.org/).