no beneficiary designation

[k man]

distribution must occur to the estate as per the plan document. however if attorney establishes via probate where the money will end up, can a check be made payable directly to that person as opposed to the estate which would be more efficient?

[david rigby]

I had a similar case last year. We followed the plan document. It is difficult to defend any other procedure.

[Peter Gulia]

There is another way, if a plan fiduciary is open to taking some risk. A plan's administrator and trustee might be willing to pay the ultimate takers under a written agreement that those payments are a satisfaction of the plan's obligation to pay the estate. The agreement would include that satisfaction, releases, exoneration, indemnification, and other protections for the plan.

I don't suggest even considering this unless:

• the plan administrator feels like helping meet the request;
• the plan administrator is regularly represented by its lawyer;
• the plan administrator's lawyer is comfortable with the requesting lawyer;
• the plan administrator is satisfied that the indemnitors (including the requesting lawyer) have, and will continue to have, more than enough assets to indemnify a complete loss and expenses; and
• there is almost no doubt about the correctness of the estate's personal representative's instruction about which persons do and do not get distributions, and what each's share is.

I have done this once or twice when my client and I were comfortable with all of the people involved, especially the requesting lawyer.

[QDROphile]

What you describe is the plan cutting the check to a person designated by the estate as a courtesy to the estate to save the estate some administrative steps. The tax reporting by the plan is still that the plan distrubuted to the estate. This does not seem like a huge benefit to the estate and it could implicate the plan as a conspirator in some evil machinations by the estate or the estate beneficiary to evade taxes or something else like a bogus rollover. The plan does not owe the estate any accommodation. It only owes the distribution.

[Peter Gulia]

Yes, only with proper tax reporting AND withholding.

The once or twice I helped was many years ago, and many rules have changed since then.

Among them, QDROphile points out that, following the 1992, 2001, and 2006 changes in the tax and rollover rules, a plan's administrator might consider restraint so that a payee can't effect a purported rollover that isn't eligible.

Like many things in American business and legal life, it keeps getting harder to offer administrative convenience to a neighbor.

[Slider]

I've run across a situation in which the pensioner elected a single life annuity with a 10-year guarantee. He died within 2 years of beginning his payments. The named beneficiary predeceased him and there is no named contingent beneficiary. Under the plan, the estate would be the default beneficiary under these facts. So, does this mean the estate would have to stay open for another eight years?

[masteff]

Two words: state law

Estates and probate fall under state law. Some states have provisions that may apply, such as "affidavit of small estate". A competent attorney with adequate knowledge of a particular state's estate and probate laws should be consulted. The burden is really on the estate and estate's beneficiaries to provide you sufficient legal reason to do something other than pay the estate. If they have to keep the estate open for some number of years, that's their problem, not the plans. (Sorry if that seems callous but my job is to protect the plan and its qualified status.)

[FormsRstillmylife]

We inserted a provision into our documents that provides for a lump sum under these circumstances, subject of course to AFTAP funding level.

[MoJo]

While I can't say that I've never seen this occur (and may, possibly, perhap assisted in that regards), I cannot emphasize enough the cautions FGC noted above. Add to that the possibility of a creditor of the estate coming forward demanding payment, and well, you have the proverbial "can of worms."