Category Archives: beneficiary accounts
Dear Liza: My Dad passed away last year in the month of November. Prior to Daddy’s death, he was receiving monthly pension benefits. Once my step-mother notified the insurance company that Daddy had died, the company immediately withdrew his pension benefits from their checking account in the month of December. Up to this date, my step-mother hasn’t been able to receive Daddy’s pension benefits. Can the insurance company refuse to give my step-mother my dad’s pension benefits? Yes, they can. Pensions often terminate upon the death of the participant. Unlike an IRA or 401-K, traditional pensions are often promises of a monthly benefit for the lifetime of an employee, based on the length of time that employee worked for the company. (IRA’s and 401-K plans allow an employee to save their own money during their peak earning years on a tax-deferred basis, so that they can withdraw the money after they’ve retired. If they die with money left in those accounts, they can leave this money to a named beneficiary.) Sometimes, a pension plan allows an employee to elect to take less during their lifetime so that their surviving spouse can receive benefits during his or her lifetime, but not always. If your father had a plan that only paid him a pension during his lifetime, your stepmother wouldn’t be entitled to any benefits under the plan. Perhaps your stepmother can get clarification of how the pension worked from your father’s former employer.
Dear Liza: My Mother passed in Feb of this year. She opened a joint account with my Sister, so, should she become incapacitated, my sister could write checks on her behalf and it was opened with the understanding, that should something happen to my mother, the joint checking account should be split with her six other brother’s and sisters. My sister is claiming the money is now hers to do with what she wants, who is right? This is one of those estate planning situations that come up a lot, and it’s also one where the law is clear, the moral obligations murky. Aged parents often put one child on an account like that, to make it easier to let them take care of their finances. But in making your sister the joint owner of the account, your mother also made her the legal owner of the money now because she is the surviving joint owner. If your mother had wanted to make absolutely bullet-proof sure that any money in that account was to be split equally among all seven of you, she should have put that account into the trust (assuming that the trust splits everything seven equal ways) or named all seven of you as pay-on-death beneficiaries. But, of course, that’s no solace now. If your sister wants to honor your mother’s wishes, she could do that, but she’s not legally obligated to do so.
Dear Liza: My father just died. He left his Roth IRA to ten family members, thrilled to be leaving us with a long-term retirement investment. But two of the beneficiaries are under 18, and our credit union is saying that the minors can’t keep the Roth IRA, but have to cash out their shares and open custodial accounts. That’s not what my Dad would have wanted. Are they right? Yes, most likely. Here’s the deal: a minor can inherit property, but under state law, minors can’t control that property until they’re legal adults. In California, where I practice, a minor cannot own more than $5,000 without some form of legal control and management by an adult, like a property guardianship, a custodial account, or a trust for that minor’s benefit. A property guardian is appointed by the court, and may be a child’s parent or any person nominated by the parent. The guardianship terminates when the child becomes a legal adult — 18 in my state, but this varies by state law as well. So, check with your credit union to see if they’d permit you to keep those accounts under a property guardianship to age 18. If so, it may be worth it to you get yourself appointed as property guardian. Alternatively, cash those accounts out, open up a custodial account at the credit union, and don’t let those kids touch that money. When the custodial accounts end (25 in my state; varies by state law), make them open up IRA’s with the money because that was your father’s wish. You can’t legally require that they do so, but you can make them feel really, really guilty if they don’t.
Dear Liza: My father recently died. My mother died years ago. I just assumed that I’d be the beneficiary of my father’s IRA, and I paid all of the funeral costs and other costs associated with my father’s death. Altogether, that came to about $8,000. When I contacted the IRA plan administrator, they told me that I wasn’t the beneficiary. They wouldn’t even tell me who the beneficiary was! Turns out it is my uncle. Can I open a case in probate court to challenge this? That should be my money. I hate to be the bearer of bad news, but you really can’t go to court to challenge this unless you think there is something fraudulent about the beneficiary designation that named your uncle (for example, the signature was forged or your father was forced to do it). And even then, it wouldn’t be a probate matter, as assets passing by beneficiary designation don’t go through probate. Your father had the right to name anyone he pleased as the beneficiary of his IRA. Maybe he named his brother long ago, and just forgot to change it to you. That happens sometimes. But whatever reason he had, the money goes to the named beneficiary, period. You might appeal to your uncle’s good nature and sense of fairness, but you can’t obligate him to share.