Small Death Benefit

[Below Ground]

We have a situation where a participant died without completing a beneficiary designation form. In this event, the plan document says pay proceeds to the person's estate. The problem is that the person does not have an estate since the person had pretty much nothing. The cost to setup an estate would eat up the $800 or so due as a death benefit. Without an estate, we can't make the payment to the estate as the check could not be cashed except by the estate (or representyative thereof). Basically, create an estate for nothing, or have a check issued that can't be cashed!

What we do have is called the "Durable Power of Attorney" which names his mother to have Power of Attorney. Powers granted include "authorization to manage and conduct all of my affairs", which also allows for opening and closing of accounts, including "retirement accounts". While this seems to be the answer, does this not violate the "nonalienation clause" where a person can not assign his or her rights?

I suspect I amy be making too big of an issue, but I do believe that caution is merited. Should we just make payment to the Mom, who paid for his funeral, as beneficiary in light of the Durable Power of Attorney?

Any and all comments are appreciated! Thanks!

[masteff]

I suggest you consult an attorney in your state and determine if your state allows for an "affidavit of small estate".

EDIT: FYI - the authority given to the mother by the POA died with the participant

[GMK]

I think that power of attorney, including durable POA, ends when the person dies.

There may be a way to file a cheap estate claim without probate expenses (as I now see masteff just posted).

[Bird]

If I had evidence that the mother was effectively the beneficiary of the estate I'd just pay her. What's the downside? Can't be much worse than...well, $800 that someone else might try to lay claim to.

[GMK]

I'd like to pay Mom, too, but will the ERISA police see that as not following the terms of the Plan? Will you explain to Mom her rollover options? Do the short form estate filing, if possible, to avoid the compliance issues.

Q: Is it allowed to amend the Plan retroactively to add that in the case of no beneficiary form, the beneficiary is the surviving children, and if none, then the surviving parents, and if none then the estate? or does that have to be a proactive amendment?

In either case, I'd suggest that the plan be so amended for future cases like this.

[masteff]

At the very least, research the rules of intestate succession in your state. You can get an overview here: http://www.nolo.com/legal-encyclopedia/intestate-succession You might be able to find other free legal resources in your area that would save you the expense but provide trustworthy info.

I would start by asking the mother if the participant has a living father (ie the other parent), siblings (half or whole), children or grandchildren (as mention in a recent forum thread, you might review the obituary for clues as well). Then I would take those facts to a local attorney and pay for 1/2 hour of time to be told how your state's intestate succession rules apply. Also ask about small estate affidavit. Then require the appropriate person(s) to complete the affidavit if applicable and distribute.

Your risk is $100 to an attorney vs $800 to another heir.

Edit: Example of why intestate succession matters: if I died in Oklahoma where I live, my mother would get everything. but if I moved to Missouri and died, my mother and my brother would split equally.

[Bird]

Your risk is $100 to an attorney vs $800 to another heir.

Plus your own additional time researching, and the $100 (+) is a 100% probability, whereas the $800 is a tiny probability, at best.

I'm saying pay it to the mother effectively as the executrix, not as the beneficiary. (It's not eligible for rollover since there is not a named beneficiary; she can waive the WH.) Suppose there's another estate beneficiary...we know that there were funeral expenses that are costs to the estate that would eat this money up, so nobody is netting anything out of it anyway.

Ask me tomorrow and I might have another opinion, but today it seems silly to do otherwise.

P.S. I don't like the plan language naming the estate as the default; it's basically not making a decision which in turn makes things harder when you wind up here.

[masteff]

I'm saying pay it to the mother effectively as the executrix, not as the beneficiary. (It's not eligible for rollover since there is not a named beneficiary; she can waive the WH.) Suppose there's another estate beneficiary...we know that there were funeral expenses that are costs to the estate that would eat this money up, so nobody is netting anything out of it anyway.

Ooh, to the mother as the executrix... good call.

[Below Ground]

The POA did die with the person. You were right on that, I missed it. As too hiring an attorney, while good advice, is not likely to occur. Bird's points are right on the mark. I am not sure how you would pay to the executor. I guess we'd need to see if ING would write the check that way.

The Plan document goes first to spouse, then children, then estate. Guess what we have? A Mom and a sister or two. No wife. No kids. No estate for that matter too.

The interstate concern does apply. While it adds to the equation I do appreciate your raising that flag.

Perhaps a LegalZoom.com issue?

Regardless, thanks to all for your comments. They really do help a great deal!

[Below Ground]

Uses succession rules for Texas. They have a nice chart that covers all possible scenrios BUT one. It does not address if you die with parents and siblings but no spouse or children! Oh Lord why me????

[GMK]

Oh Lord why me????

(booming voice from the clouds) because you were handy.

FWIW, I was hoping someone had a cite to post. Maybe ING will write the check. It's worth a try.

[K2retire]

ING should be able to write the check to the "Estate of...". Whether Mom will be able to cash it without actually getting appointed by a court is another question.

[Below Ground]

We know Mom can't cash that check. We tried that with a similar situtation a while back. We didn't know there was no estate so had check payable that way. Luckily, there were no other potential claims on the one. Mom was only relative. There was no spouse, no boyfriend or girlfriend. No one. That was easy. This one is not.

[K2retire]

I have a similar situation, only the balance is about $6,000.

Young participant, no beneficiary designation, no spouse or children and the next default is the estate. She was estranged from her mother, living with a fiance (who is not likely to get anything no matter how you slice it). I spoke to a friend who is a probate judge in another jurisdiction, who recommended having whoever paid for the funeral open an estate to file a claim. The plan sponsor says there was no funeral.

How long must the plan hold this balance waiting for an estate to be opened? Can the balance be forfeited eventually?

[My 2 cents]

I may be showing my ignorance, but by default, wouldn't there always be an estate (even if it only consists of two buttons and a slightly used paper clip)? Whether there would be any effective way to handle such an estate would be another story. In this situation, if nothing else, wouldn't $800 payable to the estate establish its existence (even if the legal system fails at providing a way to efficiently handle so small an estate)?

Can a bank account be opened in the name of "the estate of ...", with the $800 being deposited there? If so, the plan could be rid of the issue, and (ultimately) the amount remaining that is not consumed by bank fees would be escheated to the state.

[masteff]

Regardless of the estrangement, has anyone informed the mother (or any other immediate relative) that a benefit exists to be claimed?

See my posts above. Some states have an affidavit of small estate. -- My father messed up the designation on an insurance policy so while everything else went directly to trust, the ins co provided my step-mother such an affidavit for her to sign and it allowed us to entirely bypass the probate process.

[BG5150]

Just google

small estate affidavit _______ [state name]

[K2retire]

I doubt that the mother has been told. We also don't really know if there is a father still living. The employer wants the money to go to the fiance, and will probably not be willing to contact the parent(s).

Thanks for the tip about the small estate affidavit.

[Below Ground]

Mom has been notified. No fiance. We have a Mom and 2 sisters. Bank will not accept check or open account for Estate. We asked Mom to get a notarized statement from the two sisters to say they agree that Mom should get the money. No word as of yet. Gonna try the BG5150 suggestion.

[jpod]

Why all the concern here? This is not a trifling amount of money, in my judgment. The money should not be paid until a duly authorized executor or administrator with the appropriate back-up paperwork steps forward, at which time you can make payment to the estate. It seems to me that $6,000 is enough money to cause the family members to look for a will, and if they can't find a will to get an administrator appointed. If the employer wants to help in some fashion that's fine, but I would not allow them to skip the formalities (Plus, the decedent may have had creditors who are entitled to some or all of that $6,000.)

[My 2 cents]

Why all the concern here? This is not a trifling amount of money, in my judgment. The money should not be paid until a duly authorized executor or administrator with the appropriate back-up paperwork steps forward, at which time you can make payment to the estate. It seems to me that $6,000 is enough money to cause the family members to look for a will, and if they can't find a will to get an administrator appointed. If the employer wants to help in some fashion that's fine, but I would not allow them to skip the formalities (Plus, the decedent may have had creditors who are entitled to some or all of that $6,000.)

Concerning creditors: Entitled, perhaps, once the money is received by the estate. Otherwise, presumably, they can't get at it until it is paid. If enough money is at stake, can the creditors finance the probate filing if the heirs don't consider it worth the cost and effort (which is more likely than not if filing fees and creditor claims will eat up the entire amount)?

Also, there is some cross-talk here. The original post said $800, and one of the responses brought in a similar situation where the money at stake is $6,000. Clearly, the quoted post is referring to the larger amount.

[Below Ground]

Jpod. Thanks for your reply BUT the original post said "cost to setup an estate would eat up the $800 or so due as a death benefit". Not $6,000. There was a subsequent post on a similar situation using $6,000 but the intended focus of this thread was a situation with a small sum. Speecifically, what do you do when the benefit is a small sum that does not justify the expense of setiing up an estate. But thanks for your reply.

[K2retire]

With my larger amount, the concern is that the money will remain unclaimed because the likely heirs are unaware of it. So, 5 or 10 years from now, what is the plan sponsor supposed to do with the account?

[masteff]

If plan admins have a duty to try to locate missing participants, do they not also have a duty to contact possible beneficiaries?