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IRA provider withholding funds from account owner post-divorce


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I have a unique client problem. Client (ex-wife) was divorced in 2009. Ex-husband's attorney drafted a QDRO and submitted it to Putnam, the IRA provider, in 2010. Putnam will only give us the QDRO from the file, and states it requested a signature from the ex-spouses on a form letter of instruction in 2010 but ex-husband never signed or did anything further. Client does not recall ever getting a request to sign anything. Further, Putnam told her in 2010 that the amount owed to ex-husband was on "hold" in her account.  At the time she thought little of it. Ex-husband died 4 years ago. Client recently tried to access the funds sitting in her account, but Putnam says there is a hold due to the language in the QDRO that says if the AP dies prior to receiving all the funds and does not designate a beneficiary "such amount shall be paid to the Alternate Payee's estate."

The client gets statements from Putnam that are titled "IRA Rollover for Mary Smith" -- the funds have never been separated into deceased husband's name.  She has no idea if he had an estate, an executor, or anything else. (They had no kids so there was no connection after divorce.) Putnam is telling her the executor can submit forms to request the funds. I am getting nowhere with them. 

For starters, I don't know why the QDRO would govern since this is an IRA (yes, some IRAs accept QDROs but this provider clearly needed other documents to process the division). I don't see what right they have to hold this money in limbo when the ex-husband never signed what was needed to separate the funds. Anyone have any suggestions about how to proceed?

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Carla G., since this is an IRA you are under your state's law. I suggest going to a state court to have a new order awarding your client's share of the IRA.

Luke Bailey

Senior Counsel

Clark Hill PLC

214-651-4572 (O) | LBailey@clarkhill.com

2600 Dallas Parkway Suite 600

Frisco, TX 75034

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While the governing law might be a State’s law, don’t assume that it’s the law of a State in which the IRA holder is or was a domiciliary or resident. Many IRA trust or custody agreements include a choice-of-law provision. Putnam’s chooses Massachusetts law.

Another reason to read the agreement: Many allow the trustee or custodian to delay a payment until potentially interfering claims are resolved. Some allow the trustee or custodian to honor a transfer incident to a divorce or separation.

If seeking a court’s order becomes necessary or helpful, consider whether the court will have or lack personal jurisdiction regarding the custodian. Some trust companies carefully avoid contacts with any more than one or two States. Putnam Fiduciary Trust Company, LLC, is a New Hampshire limited-liability company, with its office in Boston, Massachusetts. A trustee or custodian might follow a court’s order made with enough jurisdiction to bind all the competing claimants. But a court’s order is stronger if binds the trustee or custodian.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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