Per Stirpes Beneficiary Designation

[sdix401k]

Hello,

I have a participant trying to designate their children per stirpes as the primary beneficiary using a non - standardized prototype plan document.

Participant specifically writing on form  My Children - Per Stirpes same terms and conditions as the XXX Trust Dated XXX 

Is this allowed? My document simply states that it must be an individual or trust and while the individual is a person how would we determine who those surviving heirs would be? Would that be the executor of the estate?

Thoughts?

[Pam Shoup]

Ask for the copy of the trust.  Without seeing it, there is no way to tell what the terms and conditions are and if the terms and condtions can be accomodated by the plan.  You can also look at the definition of who would meet the criteria of being a child.  (Legal children, step-children, etc.)  If you have that cleared up, the executor/court could determine meets the definition.

[Bird]

On 4/23/2019 at 1:26 PM, sdix401k said:

My Children - Per Stirpes same terms and conditions as the XXX Trust Dated XXX 

To me, that sounds like a contradiction.  Per stirpes is one thing, and it would call for a direct payment to the children or their heirs with no conditions.  We don't know what the trust says but if it is a per stirpes distribution with conditions (e.g. paid out over a period of years) then that's a different thing.  If they want to specify the conditions they ought to just name the trust.  (Although naming a trust with long payouts has its own set of concerns, like what happens if the plan terminates.)

[MoJo]

If I read the situation correctly - and that is the same as Bird does, in that the Bene form pays the children directly, but does so under "terms and conditions" in an extraneous document - then I would NOT ask for the trust document, and reject the Bene form as not being a valid direction (within the four corners of the form).  Requiring a PA to even look at another document not relevant to the plan or it's administration to determine intent is an obligation I would strongly recommend AGAINST.  It opens the PA and the plan up to questions about interpretations of a document they should never have to rely on - or even look at.  What if someone disagrees with the PA's interpretation of those "terms and conditions"?

 

A risk I would not allow a client to take.  Make the participant spell out precisely what they want in the Bene form.  Personally, I would "stop" at "My children - per stirpes" as that is sufficient to split the account.

[david rigby]

1 hour ago, MoJo said:

I would "stop" at "My children - per stirpes" as that is sufficient to split the account.

I'm curious, would you inquire as to whether the participant understands that term?

[MoJo]

20 minutes ago, david rigby said:

I'm curious, would you inquire as to whether the participant understands that term?

Absolutely.  We actually provide a "piece" on the differences between per stirpes, per capita, primary and secondary, etc. - with the proviso - "talk with your own adviser/attorney".

[sdix401k]

Thanks for all of the input.  My concern is also with MOJO as I do not want to rely on any outside document that would require my firm to determine who "the children are"  what subsequent hiers those children have.

I also agree with Bird - and her comments.

I have tried going the route of just naming the trust but no go.