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For an ERISA-governed retirement plan, a situation in which, without another valid beneficiary designation, the plan-provided default beneficiary is the personal representative of the decedent’s estate, the plan’s administrator decides what evidence persuades the administrator to approve a claim. A State’s law might be relevant in, and might support, an administrator’s fact-finding and decision-making about who is or isn’t a personal representative, and about whether the plan’s obligation to pay the decedent’s personal representative has been satisfied. Yet, the claims procedure and a fiduciary’s decision-making are governed by the documents governing the plan, including an ERISA § 503 claims procedure, and ERISA’s title I. Many administrators look for “letters testamentary” or “letters of administration”, or some other court order that grants or recognize a person’s authority to act for the decedent’s estate. And some administrators use further steps designed to test whether what’s presented as such a record or certificate is authentic or a forgery. Some administrators might act following a claimant’s small-estate affidavit if it meets the conditions under a relevant State’s law and meets any further conditions the plan or its administrator imposes. Other administrators do not consider a small-estate affidavit. (For a background, including views that might differ from some of my observations, see https://benefitslink.com/boards/topic/63408-does-a-plan-pay-on-a-small-estate-affidavit/.) If a plan’s administrator has not already done so, it should design, with its ERISA lawyer’s advice, a procedure for these situations—a procedure the administrator is ready to apply regularly, uniformly, and impartially, with no more than prudent plan-administration expense. An obedient and prudent fiduciary follows one’s claims procedure (except insofar as it’s contrary to ERISA’s title I or other Federal law). This is not advice to anyone.

Client firm is a Real Estate Broker. The Plan is a 401(k) Plan which covers ONLY the owner and wife, who are both active in the business and the only employees of the firm. Outside of the Plan they are involved in various real estate speculations, and do rather well with these investments; which is why they want to expand their use of real estate under the 401(k) plan. Currently they do have two real estate investment which are solely under the Plan (no involvement of business, or commissions to the firm, with annual independent valuation). I note that they do have other investments under the trust so it is diversified. Anyway, they now want to use the trust's real estate assets in a "cash out refinance" of the 2 real estate investments, to obtain funds which will be used to improve the properties, and possibly buy additional properties. To clarify, it seems that what they are intending to do is get mortgages against the 2 properties (currently owned 100% by trust fund), and use those funds to improve the 2 properties owned, and perhaps to purchase more real estate under the trust. It is expected that this will not involve any monies outside of the trust, and that all proceeds will remain in the trust. However, I suspect this is a prohibited transaction since they are using the two properties owned as collateral for the mortgage loans they take out against those two properties. I also suspect that this will be a PT for other reasons, but am not sure how or why. I greatly appreciate any and all comments and suggestions. Thank you in advance!