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Monday, January 18, 2021

When Gift Cards Expire, They go to… Delaware?

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Joanne Butler
Joanne Butler
Joanne Butler of Wilmington is a graduate of the Kennedy School of Government at Harvard University and a former professional staff member of the Ways and Means Committee of the U.S. House of Representatives.

Because of the “Delaware loophole,” expired gift cards mean big bucks to the state

Last Christmas, you probably got a few gift cards. Maybe you popped them in the back of your wallet or in your kitchen junk drawer. Important news: gift cards are not immortal! When they expire, they go to … Delaware.

Before that happens, treat yourself or use them for a gift instead.

Why Delaware? If the issuing company is incorporated in Delaware (odds are, it is because of “Delaware loophole“), when a gift card expires, the state of Delaware gets the money. In accounting terms, this flow of the value of expired gift cards to the state’s coffers is called escheats.

Escheats are a very old common-law concept, going back to feudal times. In those days, if a person died without an heir, his/her property escheated to the local lord, or the monarch.

In addition to gift cards, if a person has a bank account and dies without an heir, chances are, the monies in that account will go to Delaware — as many of the nation’s largest banks are incorporated in Delaware.

According to the News Journal, last year the state took in about $550 million in “escheats.” As Delaware is small (one U.S. Congressman, two Senators, three counties), $550 million is a tremendous amount of money coming into the state’s revenues.

Is this fair? In the case of bank accounts, the state’s escheats officer does try to track down heirs. As for gift cards, firms could put longer expiration dates on them. They also should make that useful information easier to read by using a larger typeface.

Meanwhile with Father’s Day coming up, now is a good time to sift through your wallet, junk drawer, or wherever gift cards go to rest in your home and use them. You’ll save some money on your outlay for a gift, and, trust me, Delaware will do just fine without your gift card.


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