I have sort of a dilemna..

My mom passed away in December 2006. She was born in July 1936. Two days after her death, I received her minimum payout check from my deceased father’s annuity, that was transferred into her name.

I figured she was entitled to this check, so I deposited it into her bank account. She was issued a 1099 for this amount, and it was included in her 2006 tax return.

Starting in about late February, I started work on settling her estate. The annuity company was one of about 12 financial institutions I dealt with. Their customer service/back office was terrible, it took about 3 months and dozens of calls to get the info/forms to transfer the funds to the beneficiaries IRA BDA at another firm.

Transfer forms were submitted July 1st. Multiple follow-up call were placed to get a status of the transfers all summer long. This was the only transaction we were waiting on complete estate. Finally in late August the said Legal department was reviewing due to the fact that the December 2006 distribution should not have been put in her bank account after her death.

I informed them that the check had been put into her account, taxes paid on the distribution, and that the bank account eventually was put into the estate and distributed to respective beneficiaries equally. They were also informed that we had a limited time frame, with estate taxes due first week of September. They were sitting on this too long.

They eventually replied that all that was needed at this point was for all beneficiaries to sign a waiver saying the firm would not be held responsible for any claims by the beneficiaries that they did not get their portion. Fine not an issue.

Then they called right after the estate taxes were filed and said they would be issuing new 1099s in the names of the beneficiaries and that we would have to re-do my mom’s 2006 personal and estate return. Plus all beneficiaries would have to re-do.

I immediately expressed that this be avoided since I would have more legal and accountant fees (already around 10K). First, off we have tried to rectify this since March, and they have been sitting on this. It is not fair that they dropped this on us right after filing estate returns. At the end of the day the IRS got paid, and the beneficiaries are OK, so why create all this un-needed work. Plus, it was her required distribution. Since she was required to take the money in 2006, is it reallly a big deal that the check was cut shortly after she died?

I told the firm to cease from issuing new 1099s till I could plead my case to the legal department and do some research to confirm that they had to do this. Can they just issue new 1099s to beneficiary w/o reversing original deposit?

I am so frustrated that their neglect and delay could potentially cost me thousands of dollars, aggravation, and time….It just seems so unfair to pay for their mis-handling, especiually when IRS was paid and beneficiaries are OK with transaction….

Any input greatly appreciated….