Author Topic: A Cautionary Tale regarding beneficiaries  (Read 15314 times)

begood

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A Cautionary Tale regarding beneficiaries
« on: July 17, 2014, 01:12:10 PM »
Feel free to read on for the TL;DR details, but here's the upshot: Make sure the beneficiaries of your accounts know that they are the beneficiaries. Even better, provide them with documentation and contact information for the company holding the account.

Our experience happened to be with a low-fee provider, but it would not surprise me to learn that the same was true at all of the big money-management firms. I'll call the company LowFee.

My husband's mother and father died within a year of each other. His mom's estate took a long time to clear, in part because of one retirement account that she held at LowFee. The account was through the company she worked for, and she had it for about six years before she retired. The amount: $45K.

The estate attorney had no luck getting anyone at LowFee to discuss the account, so she asked my husband - the executor of the estate - to call.

So my husband called... and was told by the LowFee CSR that she could only speak directly to the beneficiary. He, the executor of the estate, had no authority whatsoever with regard to the LowFee retirement account. She would not tell him who the beneficiaries were, or even if there were two, a primary and a contingent.

The legal representative of the deceased is not recognized by LowFee with regard to the distribution of assets. Think about that.

He asked what LowFee did in terms of outreach to beneficiaries and was told they do nothing. NOTHING. If the beneficiary doesn't know he or she is listed as the beneficiary by the account holder, and therefore does not contact the company with very specific information in hand, including the account number and full legal name of the account holder, the company will not inform them.

He asked if the beneficiaries were listed anywhere, and she told him they were listed on the paper statement. Although now that he had notified LowFee of the account holder's death, they would no longer send paper statements.

My husband had just gone through a two-foot stack of paperwork - executing an estate is practically a full-time job - and he'd kept what he felt were critical papers and then recycled the rest.

So off he went to the recycle bin, where he plowed through the mess until he found Pg. 5 of 7 of the latest LowFee statement, which listed the beneficiaries. We were one piece of recycled paper from that $45K never reaching its intended beneficiary.

It turned out that the primary beneficiary was my husband's father, who had died a year before his mother. The contingent beneficiary was our niece - her granddaughter - who was eighteen months old at the time his mom named her the beneficiary. She's now 22.

We were lucky. We found the ONE piece of paper that gave our niece access to the money her grandmother wanted her to have. If we hadn't? Well, I don't know what LowFee would have done with it, but it certainly would not have followed the deceased's stated intentions.

How much money are these companies sitting on that will never be distributed? I thought my husband would pop a vein by the end of that phone call.

His mom had done what she thought was best: she listed her husband as the primary beneficiary, and then her granddaughter. Her own health was poor, and she did not think to change the beneficiary after her husband died. She didn't think to tell her granddaughter that there was an account with $45K that she would inherit... I'm sure she expected it would all happen as a matter of course during the settlement of the estate. But it didn't. And it wouldn't have. EVER.

So take it upon yourselves, investors and parents and grandparents, to educate and inform your beneficiaries. Don't expect any due diligence from the companies making money off your money.

Catbert

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Re: A Cautionary Tale regarding beneficiaries
« Reply #1 on: July 17, 2014, 01:31:05 PM »
We had a similar situation with a bank when my dad died.  He had CDs scattered all over town chasing interest rates.  He kept a good list of where they were, but not necessarily who the beneficiary was.  One bank wouldn't tell us who the beneficiaries were on several separate CDs.   The six possible/likely heirs (5 daughters + 1 GF) each had to write a notarized letter including a death certificate requesting any funds that might be due them.  Gigantic PITA.  Although I gave each of the others a letter to send (we are all over the country) someone didn't do it.  There is still one CD out there.  Not sure who it belongs to...shortly the state of California.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #2 on: July 17, 2014, 01:39:03 PM »
We had a similar situation with a bank when my dad died.  He had CDs scattered all over town chasing interest rates.  He kept a good list of where they were, but not necessarily who the beneficiary was.  One bank wouldn't tell us who the beneficiaries were on several separate CDs.   The six possible/likely heirs (5 daughters + 1 GF) each had to write a notarized letter including a death certificate requesting any funds that might be due them.  Gigantic PITA.  Although I gave each of the others a letter to send (we are all over the country) someone didn't do it.  There is still one CD out there.  Not sure who it belongs to...shortly the state of California.

Grr, that's so aggravating!

Until he found the piece of paper listing our niece as the contingent beneficiary, my husband had planned to have every possible beneficiary - all extended family members plus representatives of the many organizations his mother supported - call LowFee with the required information to ask if they were the beneficiaries. Ridiculous and painful.

Oh, and he was positive his dead father was the primary beneficiary, which he was. The LowFee CSR had given him thirty hoops to jump through to prove his dad really was dead, but what we realized later was that even if he had done all that, they still would NOT have told him who the contingent beneficiary was.

MooseOutFront

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Re: A Cautionary Tale regarding beneficiaries
« Reply #3 on: July 17, 2014, 01:40:22 PM »
I just got done going through and removing the beneficiaries from all of our accounts.  Next step is to do a proper will, but at least once done, what it says will be the only thing that matters.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #4 on: July 17, 2014, 01:44:53 PM »
I just got done going through and removing the beneficiaries from all of our accounts.  Next step is to do a proper will, but at least once done, what it says will be the only thing that matters.

Good for you, MooseOutFront. We've done the same.

We called a meeting with our financial dude and went through everything to make sure it says what we want.

We told him the LowFee story and he went a little green around the gills. Turns out he has an account with LowFee, and at the time, a children's hospital in the area was named as the contingent beneficiary. He came to the same realization we had: How would an organization ever know they'd been put down as a beneficiary on an individual's account? That money would never have gotten to the children's hospital. He changed his beneficiary info that same day.

Another Reader

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Re: A Cautionary Tale regarding beneficiaries
« Reply #5 on: July 17, 2014, 01:53:20 PM »
Uh-oh.  Please consider the results if you do not have a beneficiary and a contingent beneficiary on an IRA account. The account will default to the estate.  Since an estate (or a trust) is not a person, the inheritor LOSES the right to take the RMD's over his or her lifetime as defined by the IRS.  Instead, the money must be distributed over a maximum of five years.  A younger inheritor might have RMD's that occur over 50 years, not five, if they are named as beneficiary.  Anyone considering removing beneficiaries would be well advised to consult an estate planning attorney before taking that step.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #6 on: July 17, 2014, 01:57:55 PM »
Uh-oh.  Please consider the results if you do not have a beneficiary and a contingent beneficiary on an IRA account. The account will default to the estate.  Since an estate (or a trust) is not a person, the inheritor LOSES the right to take the RMD's over his or her lifetime as defined by the IRS.  Instead, the money must be distributed over a maximum of five years.  A younger inheritor might have RMD's that occur over 50 years, not five, if they are named as beneficiary.  Anyone considering removing beneficiaries would be well advised to consult an estate planning attorney before taking that step.

Thanks for this info, Another Reader. We reviewed our wording with the attorney who drew up our will.

Another Reader

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Re: A Cautionary Tale regarding beneficiaries
« Reply #7 on: July 17, 2014, 02:15:18 PM »
A beneficiary trumps the will.  The IRA is not part of the estate if there is a beneficiary (although it is subject to the estate tax).  The will merely directs how to divide the estate.  Since the IRA is part of the estate if there is no beneficiary, the ultimate inheritor will have to follow the five year RMD schedule.  The IRA also goes through probate, which it does not if there is a beneficiary.  The probate fee on a large IRA can be unpleasant.


begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #8 on: July 17, 2014, 02:21:37 PM »
A beneficiary trumps the will.  The IRA is not part of the estate if there is a beneficiary (although it is subject to the estate tax).  The will merely directs how to divide the estate.  Since the IRA is part of the estate if there is no beneficiary, the ultimate inheritor will have to follow the five year RMD schedule.  The IRA also goes through probate, which it does not if there is a beneficiary.  The probate fee on a large IRA can be unpleasant.

Our immediate reaction was to take off the beneficiary and funnel all info through the executed will. I can see how that might create problems, though. But perhaps still better than the potential of the money not ever reaching the intended recipient? We'll have to think if there are creative ways to solve this dilemma. Maybe include all beneficiary info, including account info and all required information as an addenda to the will? Then the estate attorney and executor would have access?

Our primary beneficiary is still a minor, so that definitely influenced how we approached it.

I still think the best thing to do (which is not what we currently have in place, but may need to revisit that) is to make sure that all beneficiaries know what they are entitled to, and have all the information they need to make it happen.


Zamboni

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Re: A Cautionary Tale regarding beneficiaries
« Reply #9 on: July 17, 2014, 02:25:20 PM »
Consider the luck that all of that paper evidence existed!

I think the situation will get worse . . . much worse . . . now that many people are going "paperless" with all of their statements.  At some point there won't be a default paper trail at all unless each person thinks to print out a statement periodically and put it in a designated place (like a binder with the will.)

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Re: A Cautionary Tale regarding beneficiaries
« Reply #10 on: July 17, 2014, 02:31:32 PM »
What I did was add a page to my will that lists the accounts, with account numbers, and who the primary and contingent beneficiaries are.  There's language at the top of the page that makes it clear that these accounts are separate from the remainder of my estate and that the list is being included for common knowledge.

Daleth

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Re: A Cautionary Tale regarding beneficiaries
« Reply #11 on: July 17, 2014, 02:50:56 PM »
It blows my mind that it's even legal for any financial institution to refuse to discuss a decedent's account with the f*cking EXECUTOR of the decedent's estate!!!!!!!!!

That's just crazy! Anyone want to write some letters to congresspeople?

Frankies Girl

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Re: A Cautionary Tale regarding beneficiaries
« Reply #12 on: July 17, 2014, 03:00:18 PM »
That is a scary experience, but I would not call it typical. I honestly think that if they were informed of a death of an account holder and provided with a copy of the death certificate and the executor's order - they would be opening themselves up to legal action by not complying with the order even if the executor didn't have the details on the account... It sounds as if that particular company is pretty shady and would be a good nudge to get any accounts with them transferred someplace that won't jerk the survivors around. And also a good idea to ask what the company policy is on death/inheritance procedures if you're not with one of the big name companies that streamlines the process. I wish you'd posted what company this was!

My dad had several accounts with different investment groups - Fidelity, UBS, Woodmen of the World... every single one of the ones with named beneficiaries was as simple as providing a death certificate and instructions saying "I'm the beneficiary, and I'd like the account now" basically. I did have to set up new accounts in my name for the transfers, but I was walked through the process and it was really easy (they can't give you the same account numbers and in the case of an inherited IRA, it has to be set up a certain way to make sure you do it correctly for tax purposes). We weren't required to provide the original account numbers or have any knowledge of how he'd set the accounts up; every single contact with those companies would find the accounts and give us the details, and start the transfers and let us know if there was any other info they needed.

If you don't have a beneficiary named in most investment accounts (whether IRA or taxable) then the accounts will go through probate and count into the total estate (like Another Reader pointed out) and it also means the accounts are sloooooow to transfer - in my case, it meant 1 month (beneficiary named on account) to 8-9 months (account working its way through probate). In all cases of the above named companies, any of the IRAs were converted into beneficiary IRAs and RMDs were calculated by the companies and there were absolutely no issues at all - even when it required splitting accounts between multiple named beneficiaries. I can't even imagine the tax hit if I'd been forced to take out the IRAs on the 5 year plan... that is awful!!

I made sure to update all of mine and my husband's accounts to contain beneficiaries/TOD instructions. But it is a good idea to also make sure that if we do end up deciding to leave any accounts to someone else, that they are provided with the basic account information in our will. But my personal opinion (based off of what I just went through with my dad's estate) is that it is MUCH better all around to have beneficiary/TOD named on the actual accounts.


« Last Edit: July 17, 2014, 03:05:39 PM by Frankies Girl »

mxt0133

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Re: A Cautionary Tale regarding beneficiaries
« Reply #13 on: July 17, 2014, 03:18:26 PM »
When we were drafting our will we decided to go with a living trust.  In all our accounts we listed the spouse as the primary beneficiary and the trust as the secondary beneficiary.  For the particular scenarios where both my wife and I are deceased, the executor doesn't have to run around hunting down accounts and who their beneficiaries.  The living trust has all the information and instructions that the executor needs to follow.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #14 on: July 17, 2014, 03:26:48 PM »
That is a scary experience, but I would not call it typical. I honestly think that if they were informed of a death of an account holder and provided with a copy of the death certificate and the executor's order - they would be opening themselves up to legal action by not complying with the order even if the executor didn't have the details on the account... It sounds as if that particular company is pretty shady and would be a good nudge to get any accounts with them transferred someplace that won't jerk the survivors around. And also a good idea to ask what the company policy is on death/inheritance procedures if you're not with one of the big name companies that streamlines the process. I wish you'd posted what company this was!

That's just it, Frankies Girl. It's not a shady company (though my opinion on that has changed thanks to this experience). It is a big-name company - one of the biggest. It's the company most often recommended here for its low-fee ratios on index funds. I'm not trying to be coy. I had one terrible experience with the company - I don't want to open myself up to another by spouting bad things about it BY NAME on the interwebs. ;)

Quote
My dad had several accounts with different investment groups - Fidelity, UBS, Woodmen of the World... every single one of the ones with named beneficiaries was as simple as providing a death certificate and instructions saying "I'm the beneficiary, and I'd like the account now" basically. I did have to set up new accounts in my name for the transfers, but I was walked through the process and it was really easy (they can't give you the same account numbers and in the case of an inherited IRA, it has to be set up a certain way to make sure you do it correctly for tax purposes). We weren't required to provide the original account numbers or have any knowledge of how he'd set the accounts up; every single contact with those companies would find the accounts and give us the details, and start the transfers and let us know if there was any other info they needed.

But in your case, the named beneficiaries all knew they were beneficiaries. Our stumbling block was accessing that information: who is listed as beneficiaries on the account? They absolutely would not provide that information to the executor of the estate or the estate attorney. However, once the named beneficiary knew she was the beneficiary, she was able to start the transfer process, and then it went (relatively) smoothly.

Quote
I made sure to update all of mine and my husband's accounts to contain beneficiaries/TOD instructions. But it is a good idea to also make sure that if we do end up deciding to leave any accounts to someone else, that they are provided with the basic account information in our will. But my personal opinion (based off of what I just went through with my dad's estate) is that it is MUCH better all around to have beneficiary/TOD named on the actual accounts.

I don't know what TOD means - what does it mean? I like doomspark's idea about including a list of accounts and beneficiaries with the will as "common knowledge" and separate from the estate. We will ponder these things further! I appreciate the good advice and thinky thoughts. :)

Frankies Girl

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Re: A Cautionary Tale regarding beneficiaries
« Reply #15 on: July 17, 2014, 03:46:18 PM »

But in your case, the named beneficiaries all knew they were beneficiaries. Our stumbling block was accessing that information: who is listed as beneficiaries on the account? They absolutely would not provide that information to the executor of the estate or the estate attorney. However, once the named beneficiary knew she was the beneficiary, she was able to start the transfer process, and then it went (relatively) smoothly.



I don't know what TOD means - what does it mean? I like doomspark's idea about including a list of accounts and beneficiaries with the will as "common knowledge" and separate from the estate. We will ponder these things further! I appreciate the good advice and thinky thoughts. :)

We didn't know who the beneficiaries were on the investment accounts. My dad had some stuff gathered together, but it was mostly going through papers to find what he had where. We were told upon contacting each company that he had named my sister and myself on a couple of them, but there were none named on one account, and also told how much was in each and what our options were. So we found out after contacting the various companies and informing them of his death.

And TOD is "transfer on death" designation. Some accounts use that in place of beneficiary.

And wow - if the company in question is who I think it is, that sucks! I have to think that the agent was wrong and just stupid, but if that is company policy, that just boggles my mind!

« Last Edit: July 17, 2014, 03:53:24 PM by Frankies Girl »

Another Reader

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Re: A Cautionary Tale regarding beneficiaries
« Reply #16 on: July 17, 2014, 03:57:45 PM »
The problem is if there is a beneficiary, the executor of the estate is irrelevant to the custodian institution.  The ownership of the account passes directly from the decedent to the beneficiary.  It's crazy, because if estate taxes are due, the executor needs the account information to file the return. 

A trust as beneficiary, even as contingent beneficiary, leaves the problem unresolved.  Imagine liquidating a $1M IRA over 5 years instead of 50.  The tax consequences are huge.

begood:  If you have a minor child, things become complicated.  In your shoes, I would find an experienced estate planning attorney to advise me on how to handle this.

This issue is not restricted to one company.  This issue exists at all the major companies, all of whom have legal teams devoted to inheritance issues.

Numbers Man

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Re: A Cautionary Tale regarding beneficiaries
« Reply #17 on: July 17, 2014, 04:07:05 PM »

But in your case, the named beneficiaries all knew they were beneficiaries. Our stumbling block was accessing that information: who is listed as beneficiaries on the account? They absolutely would not provide that information to the executor of the estate or the estate attorney. However, once the named beneficiary knew she was the beneficiary, she was able to start the transfer process, and then it went (relatively) smoothly.



I don't know what TOD means - what does it mean? I like doomspark's idea about including a list of accounts and beneficiaries with the will as "common knowledge" and separate from the estate. We will ponder these things further! I appreciate the good advice and thinky thoughts. :)

We didn't know who the beneficiaries were on the investment accounts. My dad had some stuff gathered together, but it was mostly going through papers to find what he had where. We were told upon contacting each company that he had named my sister and myself on a couple of them, but there were none named on one account, and also told how much was in each and what our options were. So we found out after contacting the various companies and informing them of his death.

And TOD is "transfer on death" designation. Some accounts use that in place of beneficiary.

And wow - if the company in question is who I think it is, that sucks! I have to think that the agent was wrong and just stupid, but if that is company policy, that just boggles my mind!
LOL on that just boggles my mind!

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #18 on: July 17, 2014, 05:15:22 PM »
The problem is if there is a beneficiary, the executor of the estate is irrelevant to the custodian institution.  The ownership of the account passes directly from the decedent to the beneficiary.  It's crazy, because if estate taxes are due, the executor needs the account information to file the return. 

A trust as beneficiary, even as contingent beneficiary, leaves the problem unresolved.  Imagine liquidating a $1M IRA over 5 years instead of 50.  The tax consequences are huge.

begood:  If you have a minor child, things become complicated.  In your shoes, I would find an experienced estate planning attorney to advise me on how to handle this.

I see the distinction, Another Reader, and I appreciate the advice. I will look for someone with estate planning expertise. :)

The whole thing feels like a place where a little financial education would go a long way. I'm sure my husband's mother didn't consider anything beyond who she thought should benefit from the money - her husband, and if he was no longer alive, then her granddaughter. The nuances of the custodian institution versus her chosen executor would have escaped her completely.

lizzzi

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Re: A Cautionary Tale regarding beneficiaries
« Reply #19 on: July 17, 2014, 06:53:59 PM »
My beneficiary on The Company Whom Shall Not Be Named knows that she is the beneficiary, knows the name of the company, knows where  the account numbers and password/user name/security questions are (in a sealed, bright-red envelope), and should be able to access the funds in case of my death. Being in the midst of Probate Swamp with my mother's (tiny) estate, I made sure my heirs knew all pertinent information was in bright-red, sealed envelopes in fireproof boxes, and where they are in my house. If any good comes out of my mother's disastrous lack of estate planning, it's that my heirs will have a much easier time of it. I'm even thinking I will just give them the account numbers up front, although they don't need the access information at this point.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #20 on: July 18, 2014, 02:26:35 PM »
My beneficiary on The Company Whom Shall Not Be Named knows that she is the beneficiary, knows the name of the company, knows where  the account numbers and password/user name/security questions are (in a sealed, bright-red envelope), and should be able to access the funds in case of my death. Being in the midst of Probate Swamp with my mother's (tiny) estate, I made sure my heirs knew all pertinent information was in bright-red, sealed envelopes in fireproof boxes, and where they are in my house. If any good comes out of my mother's disastrous lack of estate planning, it's that my heirs will have a much easier time of it. I'm even thinking I will just give them the account numbers up front, although they don't need the access information at this point.

I like this "sealed bright-red envelope in a fireproof safe" idea, lizzzi! Simple and effective. :)

MooseOutFront

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Re: A Cautionary Tale regarding beneficiaries
« Reply #21 on: July 18, 2014, 02:34:27 PM »
So if I want my IRAs and 401ks to go to a trust for the kids then it screws them on taxes?  I should probably get to reading up on this.  I just hate for them to end up with too much money as 18 yr olds and a trust could insulate that.

Tetsuya Hondo

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Re: A Cautionary Tale regarding beneficiaries
« Reply #22 on: July 18, 2014, 02:36:06 PM »
Thank you for posting this. We're in the middle of doing our wills now and the possibility of this never occurred to us.

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #23 on: July 18, 2014, 02:42:03 PM »
So if I want my IRAs and 401ks to go to a trust for the kids then it screws them on taxes?  I should probably get to reading up on this.  I just hate for them to end up with too much money as 18 yr olds and a trust could insulate that.

This is exactly the boat we're in, MooseOutFront: Minor child as primary beneficiary. Another Reader suggests consulting an estate planning attorney. I ran that idea by my mister last night, and he agreed. We like the insulating factor the trust provides, but the tax issues that apparently occur when retirement accounts end up in an estate rather than transferring directly to the beneficiary are a mitigating factor.

It's a shame everything is so friggin' complicated.

EMP

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Re: A Cautionary Tale regarding beneficiaries
« Reply #24 on: July 18, 2014, 08:54:22 PM »
I have learned so much from this thread.

Thanks all

Gin1984

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Re: A Cautionary Tale regarding beneficiaries
« Reply #25 on: July 19, 2014, 06:59:25 PM »
It blows my mind that it's even legal for any financial institution to refuse to discuss a decedent's account with the f*cking EXECUTOR of the decedent's estate!!!!!!!!!

That's just crazy! Anyone want to write some letters to congresspeople?
I'm not sure it is legal.  I am pretty sure, at least in my state, that it is not.  I think the provider was being shady.

usmarine1975

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Re: A Cautionary Tale regarding beneficiaries
« Reply #26 on: July 23, 2014, 10:33:11 AM »
A couple thoughts

Always have a beneficiary listed and a contingent beneficiary listed on accounts.  The money transfer's outside of Probate.  Many Lawyers will tell you to list the estate as the beneficiary for this reason.  It is a way for them to charge more as many charge a percentage of the Asset's being transferred.  With IRA's and any financial account that can have a beneficiary listed please do so. 

The only way I wouldn't do that is in reference to Trust etc... It get's a little more involved and changes things when a trust is involved.  Get a good Trust Lawyer and one you trust.

My wife and I have a 3 ring binder in which I have placed plastic sleeves.  Every thing we have financial etc.... is in that binder.  Beneficiary's are listed on each account.  The only need then is to make whoever your executor is aware that the binder exist and let them know where it is.  When we get new statements we remove the older ones and replace them with the newer statement.

I would not remove beneficiaries from any account.  Your Lawyer might be ok with it and may even advise it.  Especially if they don't have your best interest in mind.  Save the trust approach.

I forgot to add that it is important to review your Will's, beneficiaries on a somewhat regular basis.  Every 5 years should be the largest span of time.  Things change and your plan's may as well.

« Last Edit: July 23, 2014, 10:36:00 AM by usmarine1975 »

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #27 on: July 23, 2014, 11:42:17 AM »
It blows my mind that it's even legal for any financial institution to refuse to discuss a decedent's account with the f*cking EXECUTOR of the decedent's estate!!!!!!!!!

That's just crazy! Anyone want to write some letters to congresspeople?
I'm not sure it is legal.  I am pretty sure, at least in my state, that it is not.  I think the provider was being shady.

It's legal.   Details provided by the OP indicate this is a 401k, which is subject to ERISA.   That federal law is very specific about the fiduciary responsibility of LowFee.   Since the 401k isn't left to the Estate,  the executor of the Estate isn't entitled to know anything.   The transfer to a beneficiary without having the asset pass through probate affords a measure of privacy for folks with insufficient assets to benefit from a trust.   That is most people.   Difficult for this executor,  but that's how privacy works.   The LowFees of the world need to report to the IRS which retirement assets they hold under which SS# and when the owner's SS# has a D (for deceased) in the federal records,  they'll learn of it and have to either find the beneficiary or transfer funds according to the laws for unclaimed funds.

Thanks, kite! I bolded the part above. It's the "find a beneficiary" part that doesn't jibe with what Mr. begood was told.

LowFee's CSR absolutely, no-way-to-misinterpret insisted that LowFee would not do a beneficiary search or reach out to the beneficiary in this case. She was crystal clear that communication had to come from the beneficiary. [She also would not transfer Mr. begood up the CSR food chain, insisting (she was really quite insistent) that he would be given the same information at every supervisory level.]

She certainly never explained that after the death of an account owner, the account would shift into a transition state, awaiting IRS "D" status, at which point they would "find a beneficiary" (despite saying they don't do beneficiary searches) or transfer the funds (somewhere... where?) as "unclaimed". Now maybe as the executor, Mr. begood didn't qualify for that degree of detail.

I do wonder what the ratio of "unclaimed funds" is to "find a beneficiary"? And where do those "unclaimed funds" go? The CSR told Mr. begood that the money would remain at LowFee because they were protecting his mother's interests. She may have meant "until the IRS informs us that it's time for us to do the beneficiary search I just told you we don't do," but forgot to add that last part. I believe that was the moment that launched Mr. begood into full apoplexia.

You and usmarine1975 have provided very helpful information, and I thank you both!
« Last Edit: July 23, 2014, 11:44:13 AM by begood »

usmarine1975

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Re: A Cautionary Tale regarding beneficiaries
« Reply #28 on: July 23, 2014, 12:14:30 PM »
I believe the unclaimed is handled by State.  I know my state that is Pennsylvania has their own unclaimed fund.  The company does not get to keep the money until if and when they can show that they did due diligence in trying to get the money to the individual.  And even then I think the State get's the money not the company.  Correct me if I am wrong but that is my understanding.

http://www.unclaimed.org/

In fact at a former job we would actually check to see if clients had any unclaimed.  In Pennsylvania you only need the first and last name to do a search.  Sadly for me nothing came up.  Darn relatives didn't leave me anything.  LOL

Ybserp

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Re: A Cautionary Tale regarding beneficiaries
« Reply #29 on: August 17, 2014, 11:36:20 AM »
I can imagine cases where the decedent put assets in the estate for the executor to know about and intentionally kept other contributions outside of the estate. For example a guy might make his estate money goes in equal divisions to the children of the first wife with the oldest child as executor but choose to make his second and third wives beneficiaries of the 401k and IRA accounts. The kids would never learn that the second and third wives got money and neither would either of the wives learn how much the other got. It would all be privacy protected.

Still, I would not have expected Vanguard to be hard to work with.

bop

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Re: A Cautionary Tale regarding beneficiaries
« Reply #30 on: August 17, 2014, 03:27:45 PM »
Here's what Vanguard says about its beneficiary policy (for its retirement accounts). 

Question:  I've named my beneficiaries.  What happens after I pass away?

Answer:  It's a good idea to keep your beneficiary and account information with other legal papers. Upon your death, your beneficiaries or the person handling your estate should call Vanguard and speak with a specialist for instructions and help with paperwork and documentation. We will not contact your beneficiaries.

Source:  https://personal.vanguard.com/jumppage/Guide_to_Beneficiaries/index.html

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #31 on: August 18, 2014, 08:24:39 AM »
Here's what Vanguard says about its beneficiary policy (for its retirement accounts). 

Question:  I've named my beneficiaries.  What happens after I pass away?

Answer:  It's a good idea to keep your beneficiary and account information with other legal papers. Upon your death, your beneficiaries or the person handling your estate should call Vanguard and speak with a specialist for instructions and help with paperwork and documentation. We will not contact your beneficiaries.

Source:  https://personal.vanguard.com/jumppage/Guide_to_Beneficiaries/index.html

There you go. Thanks, bop.

justajane

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Re: A Cautionary Tale regarding beneficiaries
« Reply #32 on: August 19, 2014, 06:06:08 AM »
Here's a nightmare beneficiary story I heard once on NPR:

A woman married later in life and had been a lifelong teacher. She originally had her sister listed as the beneficiary on a particular retirement account and forgot to change it to her husband. She died young in her fifties, and even though it was clear to the family that it was a clerical oversight that she didn't change the beneficiary and would have wanted her husband to have the money (over $100,000), the sister kept the money. How sad for all parties (I guess except the sister.....) The moral of the story - review your beneficiaries every decade or so! When my husband and I married, I made sure he changed his retirement accounts from his nephew to me.


paddedhat

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Re: A Cautionary Tale regarding beneficiaries
« Reply #33 on: August 19, 2014, 06:52:19 AM »
That's just it, Frankies Girl. It's not a shady company (though my opinion on that has changed thanks to this experience). It is a big-name company - one of the biggest. It's the company most often recommended here for its low-fee ratios on index funds. I'm not trying to be coy. I had one terrible experience with the company - I don't want to open myself up to another by spouting bad things about it BY NAME on the interwebs. ;)


My late father was a highly decorated combat pilot who died of Non-Hodgkin's Lymphoma, as a result of Agent Orange exposure. He carefully crafted his affairs so that I would be able to avoid opening an estate in California, and did so for several legitimate reasons, including the fact that I'm in PA. and that it would waste over $10K for no legitimate reason.  During his career, and for the remainder of his lifetime, he was enamored with a large financial institution that markets themselves as a trusted partner to service members, and their families.

His entire situation would of been easy and fast to resolve, since I was named as the sole beneficiary and executor in a fresh and well drafted will. Once I claimed all assets where I was listed as beneficiary, the estate value was supposed to be low enough that it would qualify for inexpensive court filings known as "small estate affidavits". These would be used to liquidate vehicles and other small matters.

Unfortunately his bank had other plans. At some point in the recent past he was contacted by a "retirement specialist" from the bank, who wanted to churn his assets. He was talked into a new plan, and roughly a third of his net worth was placed in a new account. The bank employee was only interested in his commission, and in his haste to flip the IRA, he failed to retain my name as a beneficiary.

After his death, the bank was forced to investigate the issue, supposedly twice, but reached the same conclusion twice. They admitted no error, and would only state that what they did was legal, and that my father failed to discover that their employee removed the beneficiary, and therefore was responsible. I was welcomed to contact the feds. if I wasn't happy about it. On two separate occasions I asked employees how TF they could live with themselves, given their absolute absence of any moral compass?  At one point an employee actually called to tell me that they didn't have to even talk to me, since without a proper estate filing, I had no legal standing to my father's assets. Now, she and I both knew that she was full of shit, and trying a poker bluff, but that pretty much summed up the values instilled in this vaulted institution.

In the end, two women in their estate dept. were offended enough by the treatment that I received, and they spent weeks hounding their legal department to create a solution that wouldn't leave me totally screwed. Doing so saved me tens of thousands in taxes and legal fees.

Bottom line....... Not only is it important to name and notify beneficiaries, it's also critical to routinely monitor your investments to protect them. 

begood

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Re: A Cautionary Tale regarding beneficiaries
« Reply #34 on: August 19, 2014, 09:44:57 AM »
paddedhat, I'm sorry for your loss. :(

I'm glad you finally found people who could help you, but yes, I take your point to heart: review, assess, and provide clarity at every possible juncture when it comes to beneficiaries.

rocketpj

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Re: A Cautionary Tale regarding beneficiaries
« Reply #35 on: August 19, 2014, 09:54:15 AM »
Ok, going to review our wills again.

As it happens our beneficiaries and our wills say the same thing - spouse then children.  But nonetheless, I have a lot of little bits of money lying about (an old pension from an old job that is locked in, a life insurance policy my parents bought me, savings here and there), I should gather them into a list again and make sure it's all updated.

paddedhat

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Re: A Cautionary Tale regarding beneficiaries
« Reply #36 on: August 19, 2014, 10:14:47 AM »
One other thing to remember about beneficiaries. Don't make the mistake that my late mother did. She named me as executor and (unintentionally) sole beneficiary on one of her IRAs, and a substantial life insurance policy, for a total of roughly $400K. Now, as has been previously reported here,  at her death, that IRA and insurance are 100% mine, by virtue of being named as sole beneficiary. The Will however, directed me to distribute all of her assets in three equal shares between myself and two siblings.

At this point it could of gotten ugly. First, my estate lawyer clearly informed me that I had zero legal obligation to share anything with the siblings, if I received it outside the estate, as a sole beneficiary. Secondly, there is a vast difference between liquidating an inherited IRA and rolling it over into your own name.  Liquidating it would create huge tax liabilities. For the most part, I worked everything out with the other two spawn, and they got their just due. But a simple misunderstanding of estate law, on Mom's part, could of shorted her two youngest children $130K each, and they would of been absolutely powerless to do anything about it.

usmarine1975

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Re: A Cautionary Tale regarding beneficiaries
« Reply #37 on: August 19, 2014, 10:43:13 AM »
you can list multiple beneficiaries if the form doesn't have enough space for it ask the rep for a copy of the page or copy the beneficiary page and add away.  You do not have to limit yourself to 1 or 2 beneficiaries.  The forms are just cookie cutter.  Many advisers do not pay attention to beneficiaries on the accounts.  Why would they it doesn't affect them?  But they should. 

I had a family member pass away in mid 50's.  Not known to most of us he loaned money from another family member but to get the loan was told to change his beneficiaries to that person which he did.  The children have felt slighted they got none of it.  A friend of there's who was a lawyer tried to get the other family member to send the money to the kids but as far as I know he did not.  And he legally had no reason too.  This stuff is not paid attention to enough,  I can't stress the importance of talking to a lawyer and ensuring that you have things set up the way you want.  We don't know when we will die it's too late to change anything once we do actually die.  A will can be set up for around $250 to $500 depending on your situation.  It can cost more but it in my mind is money well spent.

The will should also include instructions if you become medically incapacitated, and who get's power of attorney rights medical, financial etc. 

ncornilsen

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Re: A Cautionary Tale regarding beneficiaries
« Reply #38 on: August 19, 2014, 11:05:41 AM »
What should someone in my position do about beneficiaries? I'm 27, not married, not in a serious enough relationship to name my SO.
Should I just name my mother? Name no-one so it all goes to my estate?

usmarine1975

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Re: A Cautionary Tale regarding beneficiaries
« Reply #39 on: August 19, 2014, 11:08:39 AM »
Personally I would name someone.  It could be your college, a trust that would help others, or your mother.  I named my father when I was single and for a brief time had my brother listed.  You can do the Estate but I wouldn't if it were me.

Dee18

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Re: A Cautionary Tale regarding beneficiaries
« Reply #40 on: August 19, 2014, 03:54:17 PM »
You can also name multiple people.  I have included close friends as beneficiaries.  It is so easy to update beneficiaries online now.  When your circumstances change, you can update.