Participant died & has living trust

[Cynchbeast]

We have a plan with a deceased participant (the owner) with a balance of around $140,000 in his 401(k). Although there was no designation of beneficiary every submitted for the 401(k), his adult son claims to be the sole heir. He claims that his father had a living trust in which the 401(k) was addressed (we are getting copy), and his attorney assures him that will take care of him inheriting dad's 401(k).

Is there any way a living trust can address this, or will the money have to go through probate, or how else will the son get his inheritance?

[Kevin C]

What does the Plan say? It should have a provision that says who the beneficiary is if no designation has been made.

[GMK]

Agreed. You have to do what the Plan Doc says.

Now, it may specify that the child(ren) inherit in the event of no spouse and no designated beneficiary, so all may be well.

[Cynchbeast]

Yes, your are correct. The document says that if there is no designated beneficiary and no spouse, the death benefit is payable to the participant's children.

So - how do w establish that the participant was not married, and that the son is, in fact the son?

[david rigby]

So - how do w establish that the participant was not married, and that the son is, in fact the son?

First part: not sure, but ask the son when his parents divorced or his mother died. Second part: birth certificate.

[GMK]

And ... Are there any other surviving children of the participant?

I'm not sure how to prove there aren't. Signed affidavit of son maybe? Plan sponsor may want legal advice on this, to avoid having to satisfy a currently unknown claimant who shows up 5 years from now.

[Peter Gulia]

In addition to David Rigby's good suggestions, consider that a prudent administrator should consider all information reasonably available to it. If the retirement plan's administrator is the employer, and the same employer also administers (or properly has access to the records of) the employer's health plan, a prudent administrator might check the health plan's records to see whether the participant had written anything that named a spouse. If so, the retirement plan's administrator might confirm (not relying on the participant's or claimant's statements) the end of a spouse relationship concerning each person previously named.

It's always difficult to prove the absence of a person or relationship. That includes a marriage because there is no unified set of records for the starts and stops of marriage.

In situations that involve a small-enough account balance and low risk, I've seen a plan's administrator tell the claimant to get a probate court's order that specifically decides the absence of other possible claimants. This is only some indirect evidence, and not legal protection.

If the plan's administrator prefers protection, one might (after prudently exhausting other steps) do a Federal court interpleader, with actual service on all those the administrator imagines might have some claim (including persons that could become personal representative of the participant's estate) and substituted service on those who are unknown or not located.

Consider that the plan's expenses for the interpleader might be paid from the plan's assets and, in appropriate facts and circumstances, might be allocated to the account of the participant who made the interpleader necessary or appropriate.

[david rigby]

BTW, this is merely a specific example of a general situation.

That is, what procedure(s) does the PA use to verify anything? For example, birth certificate, marriage license, death certificate, etc.

[Kevin C]

While not an official record, obituaries often list surviving family members and deceased spouses. Recent ones are generally available for free on newspaper websites. Older ones are available on some of the websites used for genealogy research.

[Cynchbeast]

EXCELLENT idea re obit! And the hitch here is it is the plan administrator who died. So the son is acting as administrator - - sort of a conflict of interest situation?

[Guest JordanHill]

Since there is a plan or a will the things written in it will be followed like who will get the inheritance and if there are any other request and so on but if ever there are any other legal children and want to fight for a share they can file a case to get a percentage on what's left.

[jpod]

Cynchbeast, what is your role here? I am assuming you are merely the TPA, and not a fiduciary with responsibility for making beneficiary determinations. All you can or should do is advise the plan sponsor (or the executor of the decedent if the decedent was an unincorporated sole proprietor) of what the plan says. It is up to the plan sponsor (or the executor) to proceed from there.

[david rigby]

Since there is a plan or a will the things written in it will be followed like who will get the inheritance and if there are any other request and so on but if ever there are any other legal children and want to fight for a share they can file a case to get a percentage on what's left.

This statement should not be interpreted that the plan will follow the instructions contained in a will. Post #2 above is the central advice.