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Retirement plan of deceased family member had no designated beneficiary

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My brother passed away in January of this year. He worked for PWC and had 3 different retirement accounts there, as well as a life insurance policy. One of these, which was called a “wealth builder” plan, had no designated beneficiary. He had made me the beneficiary of the other 2 retirement accounts and the life insurance policy. In 2015, he had sent my father and me an email with a PDF file entitled “Sissy’s benefits.” This was a breakdown of his 401k, an RBAP account, and the wealth builder.  In the body of the letter he simply put “This is it plus the $20k in life insurance.” We had also talked to him on the phone and he said that he had taken care of everything. After he passed away, we found out that the beneficiary designation on the wealth builder had been omitted. We did find out much later that he had made the designations on the other accounts within a day of the email he had sent us in 2015. We also found out that there was never any beneficiary named for that account. We can’t begin to speculate as to what happened. PWC said the money will have to go into the estate. My father is the Administrator  of the estate and there was no will. So basically,  once everything goes through probate, the money that’s left will go to him. My father would like for me to receive the money as he believes that my brother intended for me to have it. I have no other siblings and he was never married so there is no conflict. Right now, my dad is consulting with different people at PWC. Most have been sympathetic, but nobody has been able to really help. Does anyone have any thoughts on this? Thank you in advance for any assistance or ideas you might have to offer!

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I'm sorry for your loss.  This is probably way too complicated for anyone to give definitive answers, but my comments/questions are:

  • Please confirm that it is just the one plan or account, "wealth builder" that did not have a bene des. You are in fact getting the others per bene des?
  • Is it a qualified retirement plan or something else?
  • There's not much you can do to prove intent.
  • Most plans would have a default beneficiary, and it would probably be spouse, then parents.  So your dad would be the default.  (Which isn't quite the same as the estate, even if it would pass thru to him from the estate.)  If that's the case, your dad could disclaim, but then it would go to the next default bene, which is probably the estate, so it would go to him anyway.  If the plan names a third default beneficiary, and it is in fact "siblings", then it might be possible that this could ratchet down directly to you, but that might be subject to someone's interpretation.  It's worth looking into - your dad should request a copy of the plan language pertaining to default beneficiaries.
  • Worst case scenario isn't so bad - your dad claims the money and then just gives it to you.  Every person is allowed to give $15,000 tax* free per year...but I doubt there are any consequences if the amount is over that, because the unified lifetime estate and gift tax exemption is $11.4 million.  If your dad's estate is over that then hire a lawyer...

*Estate tax free that is - there are no income taxes on gifting.

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Thank you for your condolences. The wealth builder is the only plan without a beneficiary designation. In fact, I have already rolled over the other 2 accounts into a beneficiary IRA. I’m sorry. I don’t know if it is a qualified retirement plan. I’m not sure what that means. I think my father would prefer that it not go through the estate due to the taxes. However, I will ask him to ask PWC for the plan language referring to the beneficiary designation. I’m just not sure if they will give him that information. Thank you so much for your recommendations. We will certainly look into these things now. 

Perhaps this will help you understand what kind of account this is. I just found this on the PWC site :

Retirement Wealth Builder Plan
Wealth Builder is a retirement plan completely funded by PwC. Firm contributions to this plan are based on job level, and years of service in some cases. In addition, new hires are eligible for a Wealth Builder bonus equal to 1% of eligible compensation upon joining the firm. You vest in the firm’s Wealth Builder contributions on a graded schedule over a five-year period.

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Looks like a qualified plan from what I can tell.  Participants (and beneficiaries) are entitled to see the full plan document.

There's no way they can pay it to you if you weren't named.  I do think it is unusual that there wouldn't be a default beneficiary other than the estate but it's not impossible.  If your dad is in fact the bene by default that at least gives him some options - he could roll it to his own inherited IRA and then name you as bene; maybe he could take small-ish distributions each year (to minimize the income taxes) and then give them to you.  Depends on how much money there is.

Good luck.

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Pomsplace, following on what Bird says above, if your father were the default beneficiary under the plan document (rather than the estate's being the beneficiary), and if you were the NEXT default beneficiary, if your father had predeceased your brother, then your father could disclaim under the Internal Revenue Code rules for a qualified disclaimer. Must be done within 9 months. If the disclaimer is available and done, then the next default beneficiary (i.e., you, in the above hypothetical) would take the benefit directly.

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Thank you Mr. Bailey. We haven’t actually seen the plan language for ourselves, but  unfortunately, we are being told that the estate is indeed the default beneficiary. Now my father is trying to figure out if the retirement account does have to go through probate, how are the taxes figured?  Will the estate pay the taxes and at what tax rate? Or will my dad pay the taxes as the estate beneficiary? The plan is worth approximately $110k. There really won’t be too much more in the estate other than this money. 

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Pomsplace, sorry I cannot help you more. You may need the advice of an attorney in your local area who understands probate and tax law. Good luck.

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