Is there a specific rule or best practice on when a checking or mmda account should become inactive... we currently have 12 months in our disclosures.. is this soon enough or could we wait until 18 months?

Not aware of any specific rule. We use 12 months for "inactive" to generate a notice to the customer. Then at 18 months for "dormant" and begin charging a fee.

Pretty much the banks discretion until 3 years when they become escheatable to the state.

Just make sure you comply with State law prior to imposing any fees:

(4) A holder may not impose with respect to property described in subsection (1) of this section any charge due to dormancy or inactivity or cease payment of interest unless:

(a) There is an enforceable written contract between the holder and the owner of the property pursuant to which the holder may impose a charge or cease payment of interest;

(b) For property in excess of ten dollars, the holder, no more than three months before the initial imposition of those charges or cessation of interest, has given written notice to the owner of the amount of those charges at the last known address of the owner stating that those charges will be imposed or that interest will cease, but the notice provided in this section need not be given with respect to charges imposed or interest ceased before June 30, 1983; and

(c) The holder regularly imposes such charges or ceases payment of interest and does not regularly reverse or otherwise cancel them or retroactively credit interest with respect to the property.

You also, may be able to escheat earlier. Contact the state.