Who Gets the Money When The Seller of a Partial Disappears?
Dear PAPER SOURCE,
Several years ago I bought a partial note in my IRA. The original note holder was to receive part of the balloon.
Three years ago the note paid off and the original note holder is nowhere to be found. The property owner heard she had fled the country because of criminal problems (maybe that’s why she sold me the note). Registered letters come back “moved — left no forwarding address.”
My IRA administrator has her $30,000 in his trust account. He wants an independent opinion as to when it should be turned over to me. Have you ever had this experience with any of your partials? — Ken A. Engle, Fresno, CA
Ken, if you deal in partials long enough this is bound to happen. I know of funds that have been escrowed for years waiting for the original note holders to claim them.
I asked William L. Exeter to answer your question. He is the President and Chief Executive Officer for Exeter 1031 Exchange Services, LLC, Exeter Fiduciary Services, LLC, Exeter IRA Servcies, LLC and their affiliate companies (http://www.exeter1031.com.) He is an expert in using notes in retirement plans:
“Mr. Engle’s letter describes a problem more common than people realize. Unfortunately, the solution is not what most people want to hear.
“As I understand the situation, Mr. Engle’s Self-Directed Individual Retirement Account purchased a portion of a note (a transaction completed in the State of California). The original note holder was to receive $30,000.00 from the balloon payment at maturity (which occurred approximately three years ago). Attempts to locate the original note holder have been unsuccessful. The funds have been held by Mr. Engle’s IRA Administrator. Mr. Engle wants to know when he can obtain the $30,000.00.
“The $30,000.00 is now considered abandoned or unclaimed property. This unclaimed property can not be claimed by Mr. Engle based on the details outlined in his letter. He has no legal ownership or vested interest in the $30,000.00. Therefore, the disposition of the funds will be governed by the respective state’s abandoned or unclaimed property laws and regulations. Holders of unclaimed property should consult with legal counsel to insure compliance with local laws and regulations. In this case, the Unclaimed Property Law contained in the State of California’s Code of Civil Procedure appears to apply.
“Generally, this law requires holders of unclaimed property to make every reasonable attempt to notify the rightful owner (in this case, the original note holder). California law and regulations require the holder of unclaimed property to escheat (forward) the property to the State of California after a specified period of time (usually three to seven years) depending upon the type of property or account.
