Bank lost beneficiary paperwork, says must go through probate

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revheck
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Bank lost beneficiary paperwork, says must go through probate

Post by revheck » Fri Oct 12, 2018 9:50 pm

My father in-law passed last month. My wife and her sister are his only heirs. They remember visiting bank/brokerage with their father in 2007, when he filled out the beneficiary forms. In fact, my wife has handwritten notes in her files from with name of original bank that state "Payable on Death", "daughters as beneficiaries". The bank was bought out by a larger brokerage in 2012. The new brokerage says they have no record of beneficiaries. Consequently, they say the estate must go through probate before they will release funds. This of course will take time and money.

It's clear the bank lost the beneficiary paperwork in the merger. Is there any recourse other than going through probate?

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cheese_breath
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by cheese_breath » Fri Oct 12, 2018 10:03 pm

Did FIL have more than one account at the bank? DW inherited an IRA from her mother when she died and assumed sole ownership of their joint checking account. I was at the bank with DW when she filled out beneficiary forms leaving both (we thought) to her children when she passed. With DW now in a nursing home I recently gained POA on the checking account and discovered it has no beneficiaries on it. So I went through all DW's papers and discovered the form she signed only applied to the IRA.
The surest way to know the future is when it becomes the past.

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HueyLD
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by HueyLD » Fri Oct 12, 2018 10:07 pm

Does your wife have a copy of the beneficiary designation form signed and dated by her father?

Without it, how does she prove that such a form was actually submitted?

I am so sorry for the terrible mistake by the bank.

revheck
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by revheck » Fri Oct 12, 2018 10:13 pm

No, she does not have a copy of the beneficiary form filled out by her father in 2007. Is that her responsibility? (She does have the handwritten notes she took from the meeting.)

Doesn't the bank have responsibility to preserve record of beneficiaries form during a merger; or at least insure they get one for an account held by a 94-yr old customer?

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HueyLD
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by HueyLD » Fri Oct 12, 2018 10:21 pm

Since she has no proof, she is pretty much out of luck.

I guess she can tell the bank that she will contact a local TV station. :shock:

RickBoglehead
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by RickBoglehead » Fri Oct 12, 2018 10:26 pm

FIL was responsible to keep copies of all forms and check his designations yearly. Without proof, she has no options.

tibbitts
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by tibbitts » Fri Oct 12, 2018 10:42 pm

revheck wrote:
Fri Oct 12, 2018 10:13 pm
No, she does not have a copy of the beneficiary form filled out by her father in 2007. Is that her responsibility? (She does have the handwritten notes she took from the meeting.)

Doesn't the bank have responsibility to preserve record of beneficiaries form during a merger; or at least insure they get one for an account held by a 94-yr old customer?
I would say no, the bank is not responsible for getting a beneficiary form under any circumstances. They should not have lost the form but something I've learned the hard way (> $10,000) is that you have to follow up on transactions (or designations in this case) to make sure they occur properly.

Alan S.
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by Alan S. » Fri Oct 12, 2018 11:40 pm

While it would not be conclusive, if he kept old bank statements for this account, those should be checked to see if they show any evidence of a POD. POD is usually the term applied to a checking or savings account, so at least this is not an IRA where a loss of designated beneficiary documentation would also cost much of the stretch.

And if other assets went to the estate, probate would be necessary anyway. Then the main issue would be whether the will beneficiaries and shares differed from that intended for the bank account.


Loss of beneficiary forms is fairly commonplace due to mergers, changes of processing platforms, and other reasons. Therefore, while people should be checking the status of their beneficiaries periodically and possibly annually, whenever these type of changes takes place, the status should be checked immediately after the change.

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dual
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by dual » Sat Oct 13, 2018 12:11 am

Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.

I am now adding to my end of year activities to verify that my beneficiary designations for all accounts are still in force and accurate.

To OP, here in CA and AFAIK in most other states there is a small estate category that does not have to go through probate. In CA the limit is $150K. Other assets that are transferred with beneficiary/POD designations do not count against the limit. Worth checking into for your state.

EZ James
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by EZ James » Sat Oct 13, 2018 5:13 am

As executor I had a problem with removal of a beneficiary from a POD on file with an online bank. This was for a CD worth $27k. My proof was my record of a Faxed bank form having been successfully transmitted while I was POA before the owner died.

Despite endless dialogue with various workers and managers I could not get them to comply.

The bank agreement called for arbitration if I wished to pursue it. My lawyer said I must pursue it as a fiduciary responsibility even though I was sure the decedent would have preferred to let it be.

I discovered that arbitration would be prohibitively expensive. It required a few thousand dollars to get started and then a few thousand per day plus hundreds per hour for any phone calls. That approach was not worth the risk to us.

My lawyer then consulted with a colleague and found that because the CD was considered a Totten trust (in this case but not necessarily in general) we could get a court order rather than use arbitration. I forget the legal theory behind this.

He got the court order for me. The filing fee plus a certified copy of the court order cost around $430 IIRC. Sending the court order to the bank address on file did not get results as it was never forwarded to the proper branch in another state. I sent a second copy to another address and eventually got them to comply.

2015
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by 2015 » Sat Oct 13, 2018 11:25 am

It is for this reason I keep digitally backed up copies of everything. Trust, but verify.

JW-Retired
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by JW-Retired » Sat Oct 13, 2018 12:14 pm

dual wrote:
Sat Oct 13, 2018 12:11 am
Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.
TSP is a tax differed savings plan so heirs always will pay tax on the drawn out income. Do you mean the relative couldn't stretch out drawing the assets if they were not listed as a beneficiary? That doesn't seem right. Couldn't it have been transferred to an inherited IRA?
JW
Retired at Last

delamer
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by delamer » Sat Oct 13, 2018 6:07 pm

JW-Retired wrote:
Sat Oct 13, 2018 12:14 pm
dual wrote:
Sat Oct 13, 2018 12:11 am
Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.
TSP is a tax differed savings plan so heirs always will pay tax on the drawn out income. Do you mean the relative couldn't stretch out drawing the assets if they were not listed as a beneficiary? That doesn't seem right. Couldn't it have been transferred to an inherited IRA?
JW
TSP has some odd rules if the spouse inherited the account and then the spouse dies.

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Watty
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by Watty » Sat Oct 13, 2018 6:15 pm

delamer wrote:
Sat Oct 13, 2018 6:07 pm
JW-Retired wrote:
Sat Oct 13, 2018 12:14 pm
dual wrote:
Sat Oct 13, 2018 12:11 am
Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.
TSP is a tax differed savings plan so heirs always will pay tax on the drawn out income. Do you mean the relative couldn't stretch out drawing the assets if they were not listed as a beneficiary? That doesn't seem right. Couldn't it have been transferred to an inherited IRA?
JW
TSP has some odd rules if the spouse inherited the account and then the spouse dies.
There is a wiki on this.

https://www.bogleheads.org/wiki/TSP_estate_planning

Often when people post a question about a TSP when they are retired or near retirement I will point this out. There was a post a while back by someone who had run into this. When I saw that post I didn't believe it so I looked it up and it a real potential problem.

They were already doing will and in a high tax bracket so when they had to withdraw all the money from a the TSP they inherited that put them into an even higher tax bracket. If they had been able to roll the money into an inherited IRA they could have save a lot in taxes. Aside from the taxes they felt really bad that their parents had worked and saved for so long to have it lost to avoidable taxes.

Alan S.
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by Alan S. » Sat Oct 13, 2018 9:22 pm

JW-Retired wrote:
Sat Oct 13, 2018 12:14 pm
dual wrote:
Sat Oct 13, 2018 12:11 am
Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.
TSP is a tax differed savings plan so heirs always will pay tax on the drawn out income. Do you mean the relative couldn't stretch out drawing the assets if they were not listed as a beneficiary? That doesn't seem right. Couldn't it have been transferred to an inherited IRA?
JW

If the estate is the beneficiary of a qualified plan, there is NO option for a direct rollover to an inherited IRA. That can only be done for a designated beneficiary or a qualified trust. While the qualified plan could offer the IRS options (5 year rule for death prior to RBD or LE of the decedent for deaths after the RBD), most of them use plan rules requiring a lump sum distribution. That means the beneficiary has high taxable income and likely an increased marginal rate in the year of the LSD as well as loss of tax deferral.

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dual
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by dual » Sun Oct 14, 2018 1:06 am

JW-Retired wrote:
Sat Oct 13, 2018 12:14 pm
dual wrote:
Sat Oct 13, 2018 12:11 am
Similar problem occurred in my family. A relative thought his TSP account named a beneficiary. TSP said did not have a record of it. Resulted in several $100K of taxable income for his heir.
TSP is a tax differed savings plan so heirs always will pay tax on the drawn out income. Do you mean the relative couldn't stretch out drawing the assets if they were not listed as a beneficiary? That doesn't seem right. Couldn't it have been transferred to an inherited IRA?
JW
Yes. The heir was a sibling so TSP said was not eligible to rollover to inherited IRA so he had to report the total balance of the TSP as income the year my relative passed away.

EZ James
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by EZ James » Sun Oct 14, 2018 1:52 am

2015: Thankfully I had both paper and digital copies. The bank did not care but it supported my request for a court order.

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celia
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by celia » Sun Oct 14, 2018 4:30 am

revheck wrote:
Fri Oct 12, 2018 9:50 pm
The bank was bought out by a larger brokerage in 2012. The new brokerage says they have no record of beneficiaries.
I would assume the new brokerage assigned new account numbers to all the accounts they took over in 2012. Are they saying the "old" account did not have any listed beneficiaries or the "new" account did not? If they are just looking at the "new" account, they should look at the "old" account too.

Vanguard has been sending us yearly lists of beneficiaries for each account for the last 3 years or so. You might check ALL the paperwork from the "old" custodian to see if there are any beneficiary confirmations there or beneficiary forms that have been signed.
revheck wrote:
Fri Oct 12, 2018 10:13 pm
No, she does not have a copy of the beneficiary form filled out by her father in 2007. Is that her responsibility? (She does have the handwritten notes she took from the meeting.)

Doesn't the bank have responsibility to preserve record of beneficiaries form during a merger; or at least insure they get one for an account held by a 94-yr old customer?
I don't think the "new" brokerage is required to keep such records. I look at it as the merger/take-over is similar to the client rolling the account over to an account at a different custodian. At the time this was being done, the owner (or his PoA) should/could have filled out new paperwork and specified the beneficiaries again or even changed them.

This situation is a good example of why a will or trust should have been created.

revheck
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Re: Bank lost beneficiary paperwork, says must go through probate

Post by revheck » Sun Oct 14, 2018 8:39 am

I don't think the "new" brokerage is required to keep such records. I look at it as the merger/take-over is similar to the client rolling the account over to an account at a different custodian. At the time this was being done, the owner (or his PoA) should/could have filled out new paperwork and specified the beneficiaries again or even changed them.
So what you and others are saying is that, although my 94-yr old father-in-law did have his beneficiary forms in place with the old brokerage, and his account transfer to the new brokerage happened automatically, it was still his responsibility to know he should contact the new brokerage to redo this beneficiary paperwork. And the new brokerage had no responsibility to request this information from him.

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