Successor Trustee

[Anonymoose]

Our client is a corporate medical office with five employees. The president (doctor) and 100% owner of the corporation died suddenly in January. He was the sole trustee of the company's profit sharing plan. Unfortunately, no successor trustee was named in the plan document. His wife is named as personal representative of his estate. She is also a VP of the corporation. The wife is trying to liquidate the assets of the Plan and make distributions to the participants. The custodian refuses to allow her authorization over the account, even though they have a copy of the Letter Testamentary and a copy of an amendment executed this month naming her as Successor Trustee. (The document allows the employer to name additional or successor trustees.) The custodian is now saying that we must have a trustee appointed by the DOL. In the meantime, four of the employees are unemployed and need the funds. Any suggestions as to how to proceed?

[My 2 cents]

Does anybody know if the DOL has such a rule? Not a lawyer or a trustee, but I am skeptical. I thought the DOL only appoints trustees when the prior trustees have been very wicked, and I have always thought that following the provisions of the trust document is always otherwise sufficient (especially if the trust document actually provides a process for establishing a successor trustee).

How to proceed? Contact the DOL, tell them that the custodian won't recognize the successor trustee you have formally named (both in accordance with the terms of the trust document AND by amendment), that the custodian told you that nothing less than a DOL-appointed trustee will suffice, and ask the DOL to intervene. As noted above, I don't think that the DOL action will consist of their appointing a trustee (but if they do, odds on it will be the widow of the owner).

You are dealing with an established custodian, aren't you? To try to hold on to the assets this way makes me wonder (unnecessarily, I hope!) whether the money is actually still there.

[QDROphile]

"Our client is a corporate medical office *** The document allows the employer to name additional or successor trustees." So the employer, not the individual trustee's personal representative, appoints the sucessor. A corporation survives the death of its shareholder. How the employer acts to appoint is a corporate matter that is not any business of the custodian as long as the corporate action in in accodance with plan terms and is communicated in conventional terms to the custodian.

[My 2 cents]

QDROphile points out that control of the employer and the trust survive the owner's death, and that the appointment of a new trustee remains within the power of the employer, consistent with the terms of the trust. I would not expect a "Letter Testamentary" to affect trusteeship, but an amendment (presumably to the trust, executed by the employer) naming a new trustee should be treated as conclusive.

Again, where does the custodian get the authority to decline to recognize the new trustee?

[masteff]

1) It may have confused things if too big a deal has been made about her being executrix and such. The primary reason (in my opinion) that matters for this purpose is to establish her authority w/in the corporation to execute corporate actions.

Does the client have a copy of their certificate of incorporation? If not, for a small fee, you can get one from the appropriate agency in your state, likely the Secretary of State. Hopefully you are able to show that the incorporated entity is named in the plan.

I would politely point out that given the employer is the corporation which still exists, the plan is not abandoned, cross-reference 29 CFR 2578.1 http://www.law.cornell.edu/cfr/text/29/2578.1 and then challenge the custodian to substantiate their position.

2) You don't indicate what level of person you are dealing with at the custodian. If in doubt, escalate. If necessary, insist on speaking to their legal department. My position would be: if they need a different corporate resolution to be signed, you'll be happy to get it, but otherwise you need the citation for the Code or Regulation that supports their refusal. (And I would use the word "refusal", they are deliberately refusing your valid document.)

[david rigby]

(And I would use the word "refusal", they are deliberately refusing your valid document.)

Just make sure your document is valid first.