IRA Won’t Correct Beneficiaries – Monterey Herald

Question: I wanted to share a serious issue we are having with my brother’s estate so that others are aware of this issue. My brother’s biggest asset was an IRA he held with a major bank. Shortly before his death, my brother spoke with his broker a few times about changing the beneficiaries of this IRA. He also completed a new beneficiary change form faxed to the bank a few days before my brother passed away. The bank does not honor this change of beneficiary! Even though the broker knew they wanted to make the switch and despite my brother having completed the forms they needed (and sent them to the bank), they plan to give the funds to the previous recipients. One of these former beneficiaries is my brother’s ex-wife! We have consulted a lawyer who informs us that this is very problematic and that the bank most likely cannot be forced to honor its new choice of beneficiary. We are sorry that his last wishes were not honored. Please warn people about this issue. It might help others, although we probably won’t succeed in our case.

Answer: You are reporting an unfortunate situation and I am sorry that your family has to go through this after the loss of a loved one. We see this unfortunate situation arise from time to time with both pensions and life insurance. About five years ago, a case was published in which a man got divorced and sent numerous beneficiary change forms to his life insurance company. At one point, the company acknowledged receipt of the change form but, when he died, their records still listed the ex-spouse as the beneficiary. In this case and because there was proof from the company that it had received the request, the family prevailed and the death benefit was paid under the new beneficiary designation.

The case law on “late” beneficiary designations not being honored for IRA accounts is murkier, and as your attorney points out, it can be difficult to prevail in this sort of situation. The only thing I can advise is to make sure you receive an acknowledgment from the bank or IRA custodian that they have received the change forms. Ideally, you should receive a statement from the company showing the new beneficiaries. So I guess the lesson here is to make sure you follow up with the company, repeatedly, if necessary, to get a statement from them that the new designation is on their books.

Question: We’re looking after my sister’s estate. She didn’t have much, just a few bank accounts and a car. We went to the bank to retrieve his accounts and they gave us a form called “Declaration of Small Estate”. The agent who gave us the form said, “fill it out and send it to our Estates Department.” No other details were provided. Reading the form (which we had to sign under penalty of perjury), he said his estate total is less than $150,000. Between the car and its accounts, the value exceeds this amount. I have two questions, first, now what? Secondly, I think the bank representative should have pointed out this problem when he gave us the form. If we signed it and just sent it, we would be committing perjury!

Answer: If your sister died after April 2022, the amount that can be claimed under a small estates return is now $166,250. If his estate exceeds this amount, consult a lawyer as you may need to have his estate probated. And, yes, the agent should have explained the form more clearly – as always, it’s a good idea to read a document carefully before signing!

Liza Horvath has over 30 years of experience in the areas of estate planning and trusts and is a licensed professional trustee. Liza is currently President of Monterey Trust Management. It is not legal or tax advice. If you have a question, call (831) 646-5262 or email [email protected]

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