Incarcerated Beneficiaries

I have a situation in which a participant died and 2 of her beneficiaries are in jail. Does the state in which the beneficiary is incarcerated dictate how the money is handled? Would you refer this situation to outside counsel? Not sure how to handle and am not finding a lot of information on the topic.

Assuming the beneficiaries aren't in jail for killing the participant, it doesn't matter that the beneficiaries are in jail.  The plan should move forward with the distributions.    

And just pay the distribution to the participant and let the participant determine how the assets should be handled? No need to setup a separate trust or anything?

32 minutes ago, JustMe said:

And just pay the distribution to the participant and let the participant determine how the assets should be handled? No need to setup a separate trust or anything?

Correct.  They don't lose their ERISA rights just because they happen to be a serial murderer!

Let's be clear while the beneficiary will be entitled to the benefit even if in prison there are very strict rules in many states (maybe all) on paying a prisoner.  The last time I had one of these the money was put into an account at the prison for the benefit of the prisoner.   You will want information form the prison or prisoner on how to write the check if you are helping do that.  It was the lady's money but it was in some odd prison account.   Everyone agreed it wasn't a violation of the anti-alienation rules because once she was out of prison she controlled the money.  It is just her control while in prison that had limits.  

Thank you all for your advice. So should we use a POA to speak with the jail or have the beneficiary speak to the jail about how to have the benefit paid out?

1 hour ago, JustMe said:

And just pay the distribution to the participant and let the participant determine how the assets should be handled? No need to setup a separate trust or anything?

Let's be clear here:  when using the word "participant" in this post, do you mean that word to refer to the beneficiary?

My apologies! Yes, payment to the beneficiary. The participant is deceased.

1 hour ago, JustMe said:

Thank you all for your advice. So should we use a POA to speak with the jail or have the beneficiary speak to the jail about how to have the benefit paid out?

There are other possibilities, including an IRA rollover.  I would get the distribution forms to the beneficiary. He fills out the forms and tells us what to do and where to send the check.  For example, he could have the check for the lump sum (minus any withholding) go to his home where his spouse lives and she could deposit the check into his account (or their account).  Not our problem so long as the appropriate documents are properly executed.  If he wants it into his prison account, he would have to provide that information in the distribution forms. 

15 hours ago, JustMe said:

Thank you all for your advice. So should we use a POA to speak with the jail or have the beneficiary speak to the jail about how to have the benefit paid out?

I will admit I was lucky enough to have a client willing to do the leg work a few years ago to find out how to pay the lady in prison to her prison account. 

Larry very well could be correct this person might want it to go to an IRA.  

I would see if you can get the form completed or at least some idea what this person wants.    That would at least narrow the range of future questions.  

Good luck on this one!  As one of my old bosses used to say all the time....  If this were easy everyone would be doing it. 

We handled a similar distribution to a beneficiary a few years ago.  We sent distribution forms directly to the inmate.  Once he completed them, we contacted the prison and at that time, warden approval was required on prisoner funds in excess of $200.  Once approval was received from the warden, the check was made payable to the inmate, mailed to the prison cashier and put in his account at the prison.

I unfortunately have some personal experience with this as I have a family member who was incarcerated for many years.  As noted above, there are limits as to how much money a person can hold in his prison account, typically $200 - $500.  So if the distribution is larger than that, it probably won't go into a prison account.  The prison account is something the inmate can use to buy things in the prison - toiletry items, concessions etc.  (despite what most people think, prisoners don't have everything given to them, they actually do have to buy certain items or they just do without)…  So just send the distribution forms to the inmate to complete.  If it were me, I would probably provide a phone number that he can call to ask any questions about his options,  You probably can't call him, but he can call you.  Then just help the inmate walk through the distribution process.  If he has a bank account or IRA that the money can be deposited into, that would be your best bet.  FYI - not everyone is prison is a serial murderer.  Sometimes people just make bad decisions.  But they are still people like me and you and often times need some extra help navigating these kinds of situations because of the limited communications in the prison, the fact that they usually don't have email, so they are using snail mail, etc.  So you need to expect the process will take a little longer than it typically would.     

One other thought on this - be extra diligent to ensure the security of the inmate and the account.  Inmates are typically in a cell with other people, or in some instances there might be as many (like 40) of them in a large bunk room. And there is a constant concern of other inmates stealing your mail and going through your belongings.  So if you get a completed form back telling you to deposit the money into a bank account, you need to be sure that is legitimate.. You need to make sure any instructions you are receiving are actually coming from that inmate.  So maybe the best way to handle that is to reach out to the prison family advocate for that facility or directly to the warden's office and ask them to monitor the process and make sure the information is actually getting to the inmate and that the inmate is really the person you are dealing with.  LOTS of shady stuff goes on..