One contingent bene deceased, is other now 100%?

[BG5150]

If a participant and his primary bene are deceased. There are two contingent benes with 50% allocation. If one of the contingent bene passes away, would the surviving bene gain 100%?

[CuseFan]

Depends - check to see how the form reads. Also need to know when the contingent beneficiary died in relation to the primary beneficiary. I could see situation where the lone surviving contingent beneficiary gets it all and I could see a situation where the deceased contingent beneficiary's estate is entitled to his/her half.

[Larry Starr]

3 hours ago, BG5150 said:

If a participant and his primary bene are deceased. There are two contingent benes with 50% allocation. If one of the contingent bene passes away, would the surviving bene gain 100%?

Depends is correct.  It depends on how the beneficiary form is filled out.  If the contingent beneficiaries are listed as "per stirpes", the the deceased contingent's 50% share would go to his/her heirs.  If it is "per capita", it will go 100% to the remaining contingent beneficiary.

[Luke Bailey]

On ‎1‎/‎3‎/‎2020 at 1:32 PM, Larry Starr said:

Depends is correct.  It depends on how the beneficiary form is filled out.  If the contingent beneficiaries are listed as "per stirpes", the the deceased contingent's 50% share would go to his/her heirs.  If it is "per capita", it will go 100% to the remaining contingent beneficiary.

I agree with CuseFan that depends on way written, but not sure I agree with Larry that per-stirpes or -capita makes a difference. If the plan language, as most do, basically permits a beneficiary designation form, but doesn't say much else, and the form specifically addresses the situation described where primary is deceased and one of contingents is also deceased, that is your answer. But if the most likely interpretation pf the beneficiary designation form language is that the 50% for the dead contingent does not go to the other contingent, the plan may say something like, "anything that is not covered by the beneficiary designation form goes to spouse or issue (and should specific per stirpes or capita for issue), and if not spouse or issue, to estate." I don't think I would import state law per stirpes and per capital concepts into the interpretation of the beneficiary designation form unless the form itself asked for it.

[Mike Preston]

The form doesn't specifically ask for it.  It is up to the person filling out the designation to specify one or the other when there are multiple beneficiaries. If not specified then one would look to the plan for clarification and if nothing found there, state law.

[Luke Bailey]

3 minutes ago, Mike Preston said:

The form doesn't specifically ask for it.  It is up to the person filling out the designation to specify one or the other when there are multiple beneficiaries. If not specified then one would look to the plan for clarification and if nothing found there, state law.

Assuming this is an ERISA-covered retirement plan,. the plan fiduciary might look to state law for nonbinding instruction to help it determine what the plan language and authorized form intends, but state law is not directly applicable. It is purely a plan document and forms determination as to what the plan intended. That general principle has been the subject of a couple of U.S. Supreme Court decisions.

[Mike Preston]

Are you saying that "if nothing found there" prong requires (and therefor allows) a Plan Administrator to determine what method to use and can do so even if such method is inconsistent with state law?

 

 

[Larry Starr]

39 minutes ago, Luke Bailey said:

I agree with CuseFan that depends on way written, but not sure I agree with Larry that per-stirpes or -capita makes a difference. If the plan language, as most do, basically permits a beneficiary designation form, but doesn't say much else, and the form specifically addresses the situation described where primary is deceased and one of contingents is also deceased, that is your answer. But if the most likely interpretation pf the beneficiary designation form language is that the 50% for the dead contingent does not go to the other contingent, the plan may say something like, "anything that is not covered by the beneficiary designation form goes to spouse or issue (and should specific per stirpes or capita for issue), and if not spouse or issue, to estate." I don't think I would import state law per stirpes and per capital concepts into the interpretation of the beneficiary designation form unless the form itself asked for it.

I don't know how you can say that!  If the contingent beneficiary designation contains the words per capita or per stirpes, then that is what must be followed by the plan administrator.  If the participant doesn't want the proceeds to go per stirpes, then the default (if no indication of per stirpes or per capita), is per capita.  Over 95% of our participants are happy with the standard defaults; in the few cases where they need something else, we rarely get to the contingents, but if we do, they hopefully are getting professional advice from their lawyer on how to fill it out (I don't give that advice; clearly the practice of state law which I do not do).  

I've attached the instructions we provide in the rare instances where someone want beneficiary forms; we explain that they are samples and if their attorney has their own forms, that is fine.  If you look at the bottom of our form, we have the following language:

 NOTE: Unless you provide otherwise in completing the Beneficiary Designation, the trustee will pay all
sums payable to more than one beneficiary equally to the living beneficiaries.

If they DON'T want that, then they better make sure they fill out the form with the specific instructions otherwise.  In the end, it is not our problem; whatever the form says is what will happen.

BeneficiaryFormsInstructions.pdf

[Larry Starr]

36 minutes ago, Mike Preston said:

The form doesn't specifically ask for it.  It is up to the person filling out the designation to specify one or the other when there are multiple beneficiaries. If not specified then one would look to the plan for clarification and if nothing found there, state law.

Agreed; and our default would be (if no clarification) "per capita".  See additional posting and our instructions which I have attached.

[Larry Starr]

32 minutes ago, Luke Bailey said:

Assuming this is an ERISA-covered retirement plan,. the plan fiduciary might look to state law for nonbinding instruction to help it determine what the plan language and authorized form intends, but state law is not directly applicable. It is purely a plan document and forms determination as to what the plan intended. That general principle has been the subject of a couple of U.S. Supreme Court decisions.

I agree that the plan SHOULD have language that resolves a conflict like this where there is NO direction as to per stirpes or per capita. Our plans do (see additional posting), but beneficiary designations are sometimes critical and a competent planner should be involved with the client to make sure they are getting what they want!

[Luke Bailey]

Larry, for some reason the link to your form would not work for me.

Obviously, if the beneficiary designation form says that if one of the named beneficiaries is dead at the death of the participant, that person's children will take, or the other contingents will divide his or her share, then you would follow that. I said in my response that you would follow whatever the beneficiary designation form specified. My point was that if the beneficiary designation form does not contain a statement regarding what happens if both the primary and his or her contingent are dead, then probably the share for the deceased contingent would be kicked back to the rules in the plan document specifying what happens to any portion of the account not covered by a beneficiary designation, i.e., surviving spouse, then children, then estate, or sometimes straight to estate.

As I stated, the link you provided to your form does not work for me. The language you quoted from it, however, seems to address only the sharing percentages where there (a) is more than one beneficiary for a particular share, and (b) the sharing percentages of those multiple beneficiaries in the same class are not specified. That is a very different question from the OP, where the percentage for the surviving beneficiary (50%) was clear, and the issue was what happens to the other 50%.

[Larry Starr]

19 hours ago, Luke Bailey said:

Larry, for some reason the link to your form would not work for me.  When you click on it, it should download automatically.  It is not a link. If you can't make that work, give me your email and I'll forward it that way.

Obviously, if the beneficiary designation form says that if one of the named beneficiaries is dead at the death of the participant, that person's children will take, or the other contingents will divide his or her share, then you would follow that. I said in my response that you would follow whatever the beneficiary designation form specified. Agreed.

My point was that if the beneficiary designation form does not contain a statement regarding what happens if both the primary and his or her contingent are dead, then probably the share for the deceased contingent would be kicked back to the rules in the plan document specifying what happens to any portion of the account not covered by a beneficiary designation, i.e., surviving spouse, then children, then estate, or sometimes straight to estate. Agreed also.

As I stated, the link you provided to your form does not work for me. The language you quoted from it, however, seems to address only the sharing percentages where there (a) is more than one beneficiary for a particular share, and (b) the sharing percentages of those multiple beneficiaries in the same class are not specified. That is a very different question from the OP, where the percentage for the surviving beneficiary (50%) was clear, and the issue was what happens to the other 50%. I'm not convinced that the OP was actually saying that; I was assuming that he listed two (with no percentages), assumed it was 50/50, and one died.  If he actually listed 50% to each, then it is certainly unclear from the form itself what the answer would be.  In my plan document, because we have THIS language in the bene forms we supply (NOTE: Unless you provide otherwise in completing the Beneficiary Designation, the trustee will pay all sums payable to more than one beneficiary equally to the living beneficiaries.), if they use that form and did the above with 50% listed to each, the PA would pay 100% to the survivor.

This just shows the importance of having superb guidance when filling out beneficiary forms; it's too late to "fix it" when you're DEAD!