Am I the owner/beneficiary?

[Guest Alice]

My husband and I were married 10/99. He changed his IRA in May 01 to make me a joing/contingent owner, form supplied by Agent in Dayton, OH. My husband passed away 2/17/02. Now the company says that the Fed Reg do not allow a joint/contingent owner and they will pay to the previous contingent beneficiary, his sister. When he asked his agent about updating the forms and told him he had gotten married again and wanted to make me the beneficiary, they sent him a change of ownership form. We completed it and thought everything was Ok because we never heard any different from the agent. Who is the beneficiary?

[mbozek]

IRAs do not permit joint ownership-- Only the person who makes contributions can be the owner. Owner can designate a beneficiary. Custodian/sponsor of IRA will pay designated beneficiary. You need to retain an attorney to discuss your rights under state law. It appears that your agent didnt give the right form to your husband to designate you as his IRA beneficiary. The question is whether you can be designated as the beneficiary under the thhory that you husband filled out a form that he intended to be a change of beneficiary designation naming you as his beneficiary.

[Guest Alice]

Thank you very much. I have retained an attorney in WV. Would it be governed by the laws of Ohio where he purchased it and where his agent is or WV laws where he was a resident since 1998?

[John G]

Your second question is best left to your lawyer, there are many possible answers especially if the funds are with a bank, brokerage or mutual fund with operations in multiple states.

You should be aware that the sister could decline to accept the inheritance, in which case the funds would either be returned to the estate or perhaps you would be next in line.... again, a question for your lawyer. If the sister is trying to claim the funds, then you have a dispute that will require a court ruling. If your problem is not with the sister, but with the custodian then this issue can be cleared up rather quickly.

I am not a lawyer, but from the facts you stated I would assume that a judge would see there was some intent to change the status of the account. The custodian should have known you can not have join ownership of an IRA, but it is less clear that an average citizen would know this. You may have an action against the custodian for incompetance.

Who was the "agent" you mentioned? A brokerage? A bank?

This is an interesting problem, I hope you will post again how it is resolved.

[Guest Alice]

The funds have not been paid to anyone yet. The lawyer for Lincoln National Life home office in Indiana, where the funds are held, I think it is a mutual fund invested in several different things, has sent some kind of letter to the sister. I was supposed to get a copy of it and never did. Anyway, the agent I mentioned is in Dayton, OH, and runs a business called LNL Financial Services.

I think what happened was that when my husband called the office he talked to the assistant because he always told me the agent was very hard to get hold of, and the assistant sent him the wrong form which we completed, including a guaranteed bank signature and there were places on there that she had circled where we were to complete the form. My attorney stated in his letter that if not for the "errors" of the Dayton office I would clearly be the beneficiary and that was my husband's intention to make me the beneficiary.

I will let you know what the resolution is. Thanks for your input.

[John G]

Sounds like the custodian is an insurance company and they clearly mislead you about what was needed. While your spouse should have followed up to make sure his wishes were acted upon, the appalling advice you got makes me think you have a good case against the firm. If the sister is not trying to take possession of the funds, then this will get resolved after a few letters between the lawyers.

If the sister seeks to collect the funds, you have a bigger problem.

You problem is a good lesson to all the folks who visit this board. Never assume that the letter of instructions or the paperwork was done correctly or filed on time. Murphy lurks in the bowels of every custodians backroom. You need to follow up all instructions to be absolutely sure the changes were made. You need to check every monthly statement to be sure transactions are posted.

Good luck with this problem. Keep us posted.

[Guest Alice]

The company has replied and said that if the sister and I don't come to an agreement on how it is to be distributed they will file an interpleader action. How does this work? Will they file it here in WV where my husband was a resident, in Indiana where the company is or in Ohio where he bought the policy? In State or Fed Court? If anyone knows, would like an answer before I proceed. Thanks. :confused:

[John G]

You need to rely on your lawyer for advice, not wait for information to show up here. Your lawyer should be taking the lead. Sounds like the sister is not willing to accept your claim. If the amount is modest, you may end up spending more money on lawyers and court costs then just reaching an agreement.

[mbozek]

Financial institutions ususally threaten an interpleader action to get the parties to settle the case by dividing the amount in dispute. But commencing an interpleader action costs money for a lawyer and some companies will wait until they are sued by one of the claimants before commencing an interpleader. I also dont know if an interpleader is a proper course of action for the company since there may have been malpractice by the agent or improper conduct by the company in giving an incorrrect change of ownership form to your husband. If there is any potential culpibality on the part of the financial institution then they will become a defendant in the action. You need to discuss these issues with your attorney.

[Guest T. Byram]

Your lawyer is the one who should be discussing these topics with you. An interpleader is the fund's only possible recourse (in the legal arena) when two people with apparently valid claims are competing for the same funds. An interpleader can be filed in several jurisdictions--usually it is wherever the funds are physically held. Whether it would be brought in state or federal court depends on the various jurisdictions involved--where the fund is located, where you live, where the sister lives, etc., the amount in dispute, and the various state and federal laws. There are many variables here. The only opinion or prediction about this that matters is your lawyer's, so that's where I would go first.

[Guest Alice]

Through my attorney we have reached an agreement, between the sister and I. He has informed the insurance company of our agreement. From my research on the internet I feel I could have won in court - whatever court - because there are lots of cases out there in my favor. But rather than go to court and considering the time it would take and the expenses, I chose to settle with her for what I would have had to pay a lawyer.

[John G]

Thanks for posting a likely conclusion. I felt you had a decent case but just taking it to trial would have cost both money and time. I think a compromise was reasonable.

Thanks for giving me something to think about. I am in Arcos de Fronteria, a pueblo blanco in Spain and missing the "action".