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BombyxMori

Beneficiaries do not want death benefit

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This is a new one to me. Has anyone ever dealt with this? A participant died and left a 60-month preretirement death benefit payable. No beneficiary designation, no spouse, no children. The plan contacted his mother, who would be the default beneficiary under the plan terms. She said she wants nothing to do with it. Apparently the participant has a sister as well, but the mother said the sister wouldn't want it either (she would be next default beneficiary after the mother). 

What would you do if the default beneficiary refuses to apply for the benefit? I'm also assuming that we wouldn't be able to get her to fill out and submit a formal disclaimer of interest. 

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Just when I thought I heard everything, lol.  I am betting a large pepperoni pizza that it will be paid out to the estate.  

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https://www.lordabbett.com/en/perspectives/retirementperspectives/how-to-reject-retirement-account-inheritance.html

Check this out. There was also a long BL conversation on this back in 2009.

Regarding getting the mother to complete required paperwork, the following encouragement should do the trick:

Mrs. X, under the terms of the ABC Plan, you are the default beneficiary and your son's death benefit must be paid to you unless you take immediate formal actions to reject the benefit. Note that if you fail to properly and timely complete these actions, the Plan will issue payment to you as required. Also please note that the distribution will be reported to the IRS as a taxable payment to you and your decision to cash or not cash the check will not impact such reporting or tax treatment. (and you can provide a copy of the recent Rev Rul that states as much)

That should pretty much guarantee she either completes required paperwork or changes her mind and accepts payment.

And then the plan must move on to the sister, regardless of what the mother says.

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I suggest this be approached in a mechanical (i.e. unemotional) manner.  Click, click, click...

The mother saying she wants nothing to do with it is not an acceptable response.  If she submits a waiver, then (click) you go to the next person in line.  If the mother refuses to submit a waiver, then (click) you start sending her checks (obviously she should be made aware that's what will happen). 

Same process with the sister, if that's where it winds up.  If she submits a waiver, then (click) you start sending checks to the estate.  Again, probably worth explaining what an ugly mess that will result in.  Maybe one of them will relent and accept the checks.

Does the plan say the default is parent, then sibling, or are you going by state law?  I ask because our plans say:  spouse, otherwise children, otherwise estate.  I don't know how common or uncommon it is to have parents and siblings in there but in any event it is the plan that controls.

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You might want to ask why someone is turning down "free money".   I have seen cases where the person doesn't want it because they will lose some kind of low income based government benefit that is worth more to them than the payments from the plan.   Knowing that might make it easier to get them to sign a waiver or take some other action that meets their goal and yours.  

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And you have 9 months from death to get the benefit disclaimed.

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Just curious how you would force payments to a beneficiary without obtaining their SSN for 1099-R reporting.  Sounds like, in this case, neither of these potential beneficiaries would be willing to share that information. 

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