Gift cards have become an extremely popular method of gift-giving. Gift cards carry a number of advantages over their predecessor, the gift certificate. Generally made of hard plastic and in some cases reloadable, gift cards are easy to carry, easy to package and easy to use. However, they are also easy to forget about. In fact, so many gift cards have been pocketed and forgotten that laws have developed surrounding the funds that are loaded on old gift cards.

Escheat Laws

Every state has escheat laws that transfers custody of unclaimed property to the state after a period of years. These laws were originally enacted to cover such items as dormant bank accounts, uncashed checks and other outstanding sums of money. New laws have been enacted to specifically address how escheat applies to expired gift cards. There are currently three types of escheat laws that govern expired gift cards in the United States.

No Expiration or Escheat Laws

Under this model, gift cards never expire. The retailer must set aside a reserve fund to cover gift card redemptions. Even if the gift card is never used, the value does not escheat to the state.

60/40 Model

Under this model, gift card retailers are required to set expiration dates on the cards. The expiration date may be set by the retailer in some states, while other states have passed laws specifying how long gift cards are valid. The typical expiration period is three to five years. After the expiration date, the retailer is required to escheat 60% of the value to the state. The retailer is permitted to retain 40% of the value to cover the costs of producing the gift card.

No Expiration Date, Escheat Laws Apply

This model is the most complicated and the most difficult to apply. In states that follow this model, gift cards are not permitted to expire. However, the state expects consumers to redeem gift cards within three years. If the gift card is not redeemed in that time, the retailer must escheat the value to the state. However, if the consumer later redeems the gift card, the retailer may apply to the state for a refund. The application process and the time required for processing vary from state to state.

Each state’s laws will fall into one of the three basic models. However, the exact terms of the law may vary.