Germany is confused about handling ‘forgotten’ billions of euros

A recent survey commissioned by the charity organization SOS Children’s Villages (Germany) showed that 86% of people want money from these accounts to be transferred to funds for social projects after a reasonable period of time. Only 8% thought the government should take over these accounts and 2% suggested the bank should take over.

Germany has no official legal definition of “forgotten accounts”, but typically they are bank deposits or securities (stocks and bonds) that have not been traded for long periods of time.

Up to 4.2 billion euros ($4.9 billion) are in forgotten accounts, or “lost accounts,” in Germany, according to a 2021 report by the German Federal Ministry of Education and Research. Some other estimates say the number could be up to 9 billion euros.

“Forgotten accounts” often arise when a person has passed away, but relatives or heirs do not know or have difficulty determining its existence.

The trend of online banking makes the problem even more complicated. When there are no printed documents left, account information is often only located in an email box or on a computer hard drive. Non-traditional financial assets such as cryptocurrencies or NFTs are even more difficult to track.

The treatment of assets in forgotten accounts is not yet specifically regulated in Germany, leading to many different views. By law, forgotten accounts do not automatically become the property of the bank or government.

Therefore, the bank must keep them indefinitely; the ownership rights of the account owner or heirs never expire. The government can only take over if it is determined to be the heir under inheritance laws, not under unclaimed property regulations.

Lack of legal framework leaves account handling largely left to the banks’ own discretion. Most banks consider factors such as the account owner has passed away and no heirs can be found; There hasn’t been any contact from the customer in years or any contact information is out of date.

This also creates space for banks to decide on their own level of effort in finding owners or heirs. A major obstacle is Germany’s very strict regulations on personal data protection.

Germany has tried to find a way to solve this problem. Nearly a decade ago, Mr. Norbert Walter-Borjans, head of the State Finance Agency of North Rhine-Westphalia – Germany’s most populous state, estimated that about 2 billion euros were in inactive accounts. He called for the establishment of a national registry of forgotten assets and many efforts were made to realize this idea.

Prime Minister Friedrich Merz’s government has drafted a bill to create a centralized, public online database to help heirs look up property information. But the bill has not yet been completed.

Ms. Beatrice Eisenschmidt, a member of the board of directors of VDEE – an association representing heir search experts, based in Berlin, said that the most important solution is to build a centralized database of inactive accounts.

Experts say that currently, searching requires sending requests to many financial institutions, a process that is time-consuming and costly, causing many heirs to give up. “Therefore, many heirs decide not to continue pursuing search procedures,” Ms. Eisenschmidt said.

While the direction for handling forgotten accounts in Germany has not been finalized, many other countries have specific regulations. In the UK, accounts that are inactive after about 15 years are often transferred to a fund that specializes in supporting social and environmental projects. However, the owner or heir can still request repayment of that amount indefinitely.

In France, after 10 years of inactivity, accounts and life insurance policies will be transferred to CDC, a public financial institution. After the next 20 years, it officially became state property.

Switzerland also applies a similar approach but over a longer period. Banks in this country are required to preserve assets and continue to manage inactive accounts. To aid in finding owners, the country built a centralized database for forgotten accounts. If after 60 years there has been no contact, information about the account will be made public and heirs will have one year to process the receivership. After this period, any claim will lapse and the assets will be transferred to the government.

In the US, handling forgotten accounts is governed by state law. In most cases, banks must attempt to contact account owners after 3-5 years of inactivity. If unsuccessful, the state government – where the account holder has the last address – will take over. The property is held with a derelict property management agency, and in most cases, the owner can reclaim it at any time.