STALE DATED CHECKS: How It can Affect Your Business

stale dated checks
Close-up Of A Business Woman Giving Cheque To Her Colleague At Workplace In Office

If you’re in charge of a company’s bookkeeping, you’re certainly familiar with the frustration of reconciling the bank statement every month only to discover long-overdue cheques. Most people would simply contemplate voiding the check and releasing the funds. If this method is detected, it may result in severe fines. The state has concluded that after the check is issued, that money no longer belongs to the business owner. They’ll establish a holding site where the receiver can claim them if the business is unable to satisfy the financial commitment. Here, we’ll learn all we need to know about stale-dated checks (a stale check).

What is a Stale-dated Check?

A “stale check” (sometimes known as a “stale-dated check”) is an uncashed check that is older than six months. Although banks, credit unions, and other financial institutions may allow you to cash or deposit an old check into your account, the law does not force them to.

Different Types of Checks That Can Get Stale?

The six-month rule applies to both personal and commercial checks, including payroll checks. However, for other types of examinations, the duration can vary.

Checks from the United States Treasury (such as a federal tax return) are valid for 12 months from the date they are issued. A state government check is normally good for six months to a year, though this varies by state.

The time it takes for a cashier’s check to go stale can likewise vary — from 60 days to never — based on a variety of factors. The issuing bank may specify an expiration date on the check itself in specific situations. A certified check, which must be honored even after 180 days, maybe the lone exemption to stale-dating.

What is Unclaimed Property?

Unclaimed Property is defined as anything negotiable with monetary value. The majority of unclaimed property at the University is uncashed cheques issued by several departments. All checks that are two years old or older are required by state law to be reported to the Department of Revenue. Payroll checks, on the other hand, must be reported after one year. The reported checks would be dated 6/30 or earlier. Checks issued to California addresses must be reported directly to the State of California rather than to the State of Washington. The State of Washington forwards checks reported with addresses in other states to those states.

Letters of Due Diligence

A letter of notification regarding a stale-dated check is required by state law to be addressed to the payee. Letters are only required by state law for checks of $75.00 or more. This letter must be delivered between May and August, with a response deadline of September 30th or earlier, in order for us to meet the State’s October 31st reporting deadline. The letter should include multiple options for responding to the query, such as letter, email, or FAX.

How Can I Tell If a Check Has Become Stale?

There are a few ways to find out if a check is stale-dated, if you got the check, or if you have questions about a check you wrote.

  • Check the front of the check for the date. The check is stale if the date on it is greater than 180 days old.
  • Look for a time limit set by the issuer. The bank that issued the check may have preprinted language on the check indicating how long it is good for. Some business checks, for example, may state, “Not valid after 60 days.” It’s important to note that even if the indicated time restriction indicates that the check has expired, the bank may still cash it.
  • Maintain vigilance over the checks you write. Check your bank account to ensure that there are no outstanding checks that you’ve written. If you haven’t cashed a check-in for more than six months, your bank may consider it stale.

What Causes Stale Dated Checks?

Stale dated checks are becoming an increasing issue for plan sponsors as the number of small-balance accounts and separated members increases.

Stale dated or uncashed distribution checks are common in the following situations:

  • Mandatory Distributions of less than $1,000: It is typical for checks to go uncashed when plans cash out members with balances of less than $1,000.
  • Uncashed Plan Payments: Participants seek distributions at their usual retirement age or required minimum distributions at the age of 70-1/2, but never cash their checks.
  • Returned Checks: Checks of any denomination that are returned by the United States Postal Service as undeliverable.
  • Unresponsive Participants: Requested checks of any amount that are just not acted upon by the participant.

These issues can persist because plan sponsors frequently have erroneous address information and cannot locate other payees or beneficiaries.

Why are Stale-dated Checks Regarded as a Problem?

Plan sponsors continue to incur administration fees while participants are separated from their retirement savings because stale-dated distribution cheques are considered plan assets.

Furthermore, stale-dated check funds earn no interest or earnings and, if mishandled, can pose a risk to plan sponsors.

Are Stale-dated Checks still Acceptable?

A personal or company check that is more than six months old is technically deemed stale, but this does not imply that it is void, a bad check, or that your bank would not respect it. Simply put, it means that the financial institution has the discretion to reject the check.

Is it Possible to Cash or Deposit a Stale-dated Check?

Possibly. While a bank has the authority to decline an old check and even return it to the original issuer, it may also choose to honor it. Before attempting to cash a stale-dated check, it is a good idea to check with the bank that owns the account on which the check is issued to determine what their policy is.

What are the Dangers of Cashing Stale-dated Checks?

Here are a few things to look out for if you try to cash a stale check or someone tries to deposit a stale-dated check that you wrote.

  • After being accepted, the check could be refused. Regardless of the issuance date, your bank may allow you to deposit the check, but the issuing bank may refuse it. If this occurs, the funds may be removed from your account and you may be charged a fee.
  • The check may be returned. Even if both your bank and the issuing bank accept the stale check, it may be returned due to a lack of money. If the check writer has closed the account or does not have enough money in their account to cover the stale check, the check may bounce, and you will be liable for the check amount as well as any applicable fees.
  • Your account may slip into the red. If someone tries to cash or deposit a stale check from your checking account, your bank may still remove the funds – even if you don’t have enough to cover the amount. This may result in your account being overdrawn, and you may be charged a fee unless you request a stop-payment order.

What should I do with a check that has passed its expiration date?

If you did not deposit a check and it has been more than six months since you received it, it may be considered stale. You can try to deposit or cash it, but you risk having the check refused by your bank or returned by the issuing bank. Before attempting to cash or deposit an expired check, consider contacting the check writer and requesting a replacement check. If you’ve issued a check that has yet to be cashed, you can contact the recipient to discover if they still have the check and intend to cash it. If they insist on cashing the check, offer to write them a new one, but make sure you get the old one back first or place a stop payment order on it. This could help you prevent any unexpected fines due to negative balances.

Methods to keep a check from growing stale

If you wish to prevent the hassles that often accompany trying to clear a stale check, you should perform the following:

  • Any checks you receive should be cashed or deposited as soon as possible.
  • Instead of a check, consider using an electronic payment option.
  • Check your bank statement to ensure that no checks you’ve written have become stale. If a check you made is approaching the six-month mark but hasn’t been cashed, you’ll be able to identify it and contact the beneficiary.

Is There Anything I Can Do to Stop a Stale-dated Check From Being Accepted?

There are a few things a person can do to prevent a bank from honoring a stale check. A check stop payment order is the simplest and most effective method.

In particular, a client or any other person authorized to draw on the account might ask their bank to flag the account in order to prevent the payment of the overdue check. A stop-payment order is intended to prohibit the check from being processed and the monies from being withdrawn from the account.

A stop-payment order is valid for six months to one year, depending on the bank, but most banks will enable you to renew or extend it if the check is still due. It is critical to note that when you contact your bank to request a stop payment, you have confirmed that:

  • The check has yet to be deposited.
  • Your account has not been cleared as a result of the check.
  • You’ve got the right check number.
  • You have the right check amount.
  • You have the proper payee or recipient’s name.

A bank will do everything possible to halt payment on check-in in good faith, but a bank cannot guarantee that the check will not be executed. If a bank is unable to stop payment on a check, your funds may be debited, and you may be liable for any expenses incurred, including the price charged by your bank for stop payments.

Read Also: DEPOSITOR ACCOUNT TITLE: Definition and Examples

Another thing you may do is freeze your account to prevent a stale check from clearing. Accounts are often stopped when checks are stolen or there is another probable fraudulent activity, but you can request that your account be frozen.

When an account is frozen, all outstanding checks are prevented from being cleared. It will also prevent you from making any deposits because all transactions will be essentially halted or “frozen” until your account is unfrozen.

Do I Need an Attorney If I Have a Problem With Stale-dated Checks?

If you have an issue with a stale or expired check, you should contact a financial lawyer who can advise you on the best course of action. There may be legal remedies available to you, as well as other procedures that an attorney can assist you in taking to settle the matter.

A lawyer can assist you in understanding your rights and determining what steps you can take to protect yourself. If you have any questions or concerns, you should always consult with an attorney before taking any action.

Creating a Company Policy for Stale-dated Checks

As the owner of a business, you should take the time to explicitly outline how your organization will handle stale checks. If you receive a check, your firm policy should be to deposit it within one month to avoid losing it.

The policy should state more clearly what you will do if a receiver does not cash a check that you have issued.

Understanding state legislation is the first step in developing a practical company policy for stale-dated checks. Read up on the rules for your home state as well as any other states where your company conducts business.

Consider the types of unclaimed property you may have and research the state dormancy time for each.

Use this data to develop a policy for owner contact and state remittance for various types of uncashed checks. NAUPA’s free reporting tools can assist you in developing a sound strategy.

It’s also vital that all employees, particularly accounting staff, understand that unclaimed property does not belong to the company. Uncashed checks should never be canceled since you owe the money to either the state or the property owner. Instead, they should be checked and the owner contacted on a regular basis.

Do not place a stop payment with your bank until you have issued a new check.

Ensure that your bank accounts are balanced on a monthly basis and that you contact owners if needed. Being proactive can help you avoid dealing with out-of-date checks.

Stale Dated Checks FAQs

How old does a check have to be to be stale-dated?

Personal checks are usually good for six months from the date written on the check. However, banks may fail to detect the date or may choose to handle stale-dated checks for customers.

How do you handle a stale-dated check?

While a stale-dated check is not inherently invalid, banks may refuse to honor it as an “irregular” bill of exchange. At this stage, the drawer — also known as the check writer or issuer — must modify the date on a replacement check or issue a new check-in order for the payment to be processed.

What happens if you cash an expired check?

Even though a check has expired, you may still be able to obtain the funds owing to you. There is no legal definition of a “stale” check, and most banks will be accommodating if you are polite, persistent, and make a compelling case for why it should still be legitimate.

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