No beneficiary on file

[WCC]

Participant dies with no beneficiary form on file. The document establishes payment of benefit to:

1. Spouse (no spouse in this case) 2. per stirpes (4 children) 3. surviving parents 4. estate

An attorney for the estate is trying to tell the plan sponsor they must distribute benefits directly to the estate due to the estate documents. My response is "no" we must follow the plan document. Is there an instance where the attorney could do something to override the form of payment in the plan document? 

One thought is all four children and parents disclaim their benefits under IRC 2518. The funds then are paid to the estate.

Thank you

[Mike Preston]

Yes, they can "disclaim" their interest.  The attorney for the estate should be familiar with the requirements.

[Bird]

They can disclaim but do they want to and should they?  Why the pressing need to get the money into the estate?  (Other than the attorney creating this red herring in the first place.)  If I were one of the 4 children and I would get less by having the money go into the estate, I'd be reluctant to sign a waiver, without having some good reason.  Sounds like a typical case where somebody doesn't know what they are doing, trying to get everyone else to stand on their head.

[My 2 cents]

My guess is that they want the money to flow through some kind of trust arrangement.  Of course, if the money is big enough, whatever flows through the estate could be subject to estate taxes irrespective of it then moving out through a trust arrangement (right?).

I did think that it would only make sense if the 4 children would get the same equal shares through the estate, but then it occurred to me that it may be gummed up by some sort of trust thing.  And then, of course, as it appears that the deceased's parents are still alive, you would have to get their disclaimer also for the money to go into the estate (since they come higher than the estate in the default scheme), and (notwithstanding blood being thicker than water) what incentive would they have to do that?

But the governing principle here is that no arrangement made with respect to the estate can ever prevail over the provisions of the pension plan until and unless the plan provisions call for putting the money into the estate.  The attorney says otherwise?  Surprising. 

[My 2 cents]

Afterthought - if they did go to the trouble and expense to set up some trust thing in the estate, how is it possible that everyone involved was so careless as to not coordinate that by designating a suitable beneficiary?

[david rigby]

Follow the money. 

In this case, that might be "watch out for who gets what fee".

[K2retire]

3 minutes ago, david rigby said:

Follow the money. 

In this case, that might be "watch out for who gets what fee".

In Missouri the attorney's fee is a percentage of the assets the flow through the estate. One hopes that would not be the reason for this suggestion, but you never know.

There is also the issue of creditors of the estate who would stand to receive the funds if they go that route, but would not have a claim if the plan beneficiaries are paid directly.

[My 2 cents]

51 minutes ago, K2retire said:

In Missouri the attorney's fee is a percentage of the assets the flow through the estate. One hopes that would not be the reason for this suggestion, but you never know.

There is also the issue of creditors of the estate who would stand to receive the funds if they go that route, but would not have a claim if the plan beneficiaries are paid directly.

As they have no legitimate claim on the assets payable from the plan, no effort should be made to run them through the estate so the creditors can get a cut.

As for the legitimacy of the lawyer trying to get the pension distributions run through the estate to beef up his or her fees, well, I am having trouble finding words suitable to express the contempt in which I hold such practices!