401(k) distributions

[Guest Barb@PaineWebber]

Deceased 401(K) participant listed beneficiaries as #2 minor children (under 10 years old). The company sponsor has been approached by a person claiming to be the mother of the beneficiaries. What verification of guardianship for these #2 beneficiaries should the company request to sign off on and forward the distribution request? The deceased participant had been divorced for many years before joining the company & the plan (i.e. no person can really verify if these are the children named, or their legal guardian).

[Guest Dook]

There should be custody papers from the original divorce proceedings. If the mother was awarded custody then she only needs to prove that she is that person. If she was not awarded custody, then upon the participant's death the courts would have to appoint a guardian either in accordance with the will of the deceased or in absence of a will, the will of the court.

[Wessex]

Most (maybe all) states have a Uniform Gifts to Minors Act that may apply to your situation. I am familiar with only a few of them. Of those few, some state laws provide a specified amount that can be paid to the parent or guardian of the minor for the benefit of the minor, but if that amount is exceeded, special procedures such as establishing a bank or trust account or payment to a court may be required.

[MoJo]

I disagree to some extent. Just having the mother appointed the guardian of the persons of the children does not, in all state, make her the guardian of the estate of the children (ie their property). In some states, an actual guardianship proceeding needs to be commenced, with annual accountings of all income and disbursements from the account. This would have to be established *prior* to distributions, as the distribution would be to the "guardian, as guardian of the minor children" and the court would then require accountings....

[Dowist]

You should review the plan document. Often there is a provision that deals with this issue (payment to minors/persons with an incapacity). Arguably, ERISA would preempt any state laws regarding whom the plan can pay - the plan should be able to follow its own rules if has any - this assumes the plan is subject to ERISA. However, ideally you'd both follow the rules of the plan and get it to the right person under state law.

[M R Bernardin]

I agree that you should first look at the plan document to see who should be the payee of benefits owing to a minor beneficiary(ies). If it says the plan pays to the guardian of the minor(s), then you need documentation that the "mother" is also the guardian, such as a letter of appointment or other court order appointing the mother as guardian (capacity as parent is not generally the equivalent of legal guardianship). If it refers to the Uniform Gifts to Minors Act, you might not need a court order/appointment, but would want to verify the relationship.