IRA Issue

Submitted by Lisa Mitchell on Tue, 2018-05-22 14:01

I have a question about a problem we are having with a Wells Fargo IRA transfer. It’s a complicated scenario but I will try to lay it out as best as I can.

Following is a chain of events..

January 16th, 2017 my Aunt (PMC) had a house fire and was displaced and is put up at a Holiday Inn on a temporary basis

Early March, 2017 she is placed into an apartment on a temporary basis as her house is rebuilt

2 weeks later she falls and breaks her shoulder and is placed in a Rehab facility

April 15, 2017 PMC passes away.

My other Aunt (RMT) becomes executrix of the Estate of PMC. One of the items is an IRA…beneficiary payout schedule is as follows;

RMT – 50%

LMM (me) 17%

KSM-17%

TMT -16%

Paperwork is started in September by Wells Fargo and takes until late November / Early December to be finalized. The Wells Fargo IRA is closed in PMC’s name and opened as Beneficiary IRAs in the names of the 4 beneficiaries…all paperwork is deemed OK by Wells Fargo.

LMM and KSM have their money transferred to their respective brokers and placed in Beneficiary IRA’s opened there…RMD is taken for the 2017 year.

TMT receives her money under the same scenario.

RMT, despite trying does not have this happen as Wells Fargo states they never got her paperwork for transfer. Not sure if the RMD was taken.

2 months of calling and e-mailing does not produce a result.

On February 12th, 2018, RMT passes away with the IRA still in Wells Fargo’s hands. I AM NOW THE ACTING / CONTINGENT EXECUTRIX OF PMC’S ESTATE

By some great error / mistake it turns out that RMT, when filling out the Wells Fargo paperwork, DID NOT NAME a beneficiary. Her daughter TMT (as above) is the only heir and Executor of her Mother’s Estate. Wells Fargo will not speak with her and states that they cannot help with the situation without a proper PLR # being given to them. They will also not supply the PLR # they want because they “do not give tax advice”, but have no problem giving us the tax advice that we “have supplied an incorrect PLR #”

We are not sure where to turn for help at this point. We have spoken to Natalie Choate directly and she could think of no PLR # that applies to this situation. Just wondering if there is any way that we can get that money out of Wells Fargo and into the hands of the rightful beneficiary? Any words of wisdom would be appreciated. Thank you for help with this matter.



Submitted by Alan - IRA critic on Tue, 2018-05-22 15:57

  • Have the beneficiary clauses of the IRA agreement been fully examined?  I would expect that TMT as the executor of a deceased beneficiary’s estate with the court’s approval of her as executor, could refile the papers without naming a beneficiary and that would allow TMT to assign the IRA to whoever is named as beneficiary under RMT’s will.
  • Please confirm that 4 beneficiaries were designated by  PMC which means PMC’s executor did not have any responsibility for the IRA. Also, that PMC passed after the RBD and therefore your comments about the 2017 RMD related to the unsatisfied portion of the year of death RMD. That RMD incidentally can be completed in any combination by the beneficiaries, after they create separate inherited IRA accounts.
  • Also please clarify what Wells position is. Are they maintaining that because RMT did not complete the paperwork before passing, they will not treat RMT’s share as part of RMT’s estate? Here is what Vanguard’s beneficiary clause states:  “If a beneficiary dies after the investor but prior to receipt of the entire interest in the account and no successor beneficiary designation is in effect at the time of the beneficiary’s death, the beneficiary shall be the beneficiary’s estate.” I believe that is typical for IRA agreements. It would mean that this share would pass under RMT’s will and TMT would be able to assign the share of the IRA individually to those will beneficiaries as RMT’s executor.
  • So, Wells IRA agreement is not specific to this situation and they want a new PLR (cost around 20k) unless they are given a prior PLR that deals with this specific fact pattern? And a prior PLR was located,but was not specific enough for Wells? Again, the IRA agreement beneficiary language should be carefully reviewed. 

 

Submitted by Lisa Mitchell on Tue, 2018-05-22 17:15

Ok great starting points…I will address those things with the parties involved 

Submitted by Ben Meyer on Tue, 2018-05-22 19:35

  • It turn it that Wells Fargo has an IRA agreement and plan document posted online.  It is likely to be the same or similar to the agreement that applies to the situation here.  The specific section of interest is as follows:

“4. Beneficiary.  ***  Unless a designation filed by the Depositor and agreed to by the Custodian states otherwise, if the Beneficiary dies after the Depositor, including the time before the determination date (September 30 in the year following the year of death of the Depositor), the beneficiary will be the person, persons, legal entity, or entities designated by the Beneficiary. Such designation shall be filed with the Custodian on a form acceptable to the Custodian. In the event no designation is filed at the time of the Beneficiary’s death or there is no surviving beneficiary designated by the Beneficiary, the beneficiary shall be the Beneficiary’s surviving spouse. In the event that the Beneficiary does not have a surviving spouse, the beneficiary shall be the Beneficiary’s children as determined under state law. In such a case, a legal or personal representative shall provide the Custodian a written certification listing the names of the Beneficiary’s surviving children. If there is no legal or personal representative, a court order may be required. Under the foregoing circumstances, if the Beneficiary is not survived by children as determined under state law, the beneficiary shall be the Beneficiary’s estate.”   (Wells Fargo Bank, N.A., “Traditional IRA and Roth IRA Custodial Agreements and Disclosures, Effective July 29, 2016″, at page 23-24.)

  • Since TMT is the daughter of RMT, she should be the default beneficiary according to the above.  Further in accordance with the above “a legal or personal representative shall provide the Custodian a written certification listing the names of the Beneficiary’s surviving children.”  After providing a written certification they are required to transfer the IRA to TMT according to the terms of the above IRA agreement.  So TMT, as the executor of RMTs estate, should submit an affidavit stating her authority as executor, assuming that she has been appointed as such by a probate court, and also that she is the sole living child of RMT, and that RMT has no surviving spouse.  This all assumes that the Wells Fargo account here is subject to the same agreement as is shown above, or another agreement with similar terms.  No PLR is required here – Wells is providing a distraction.  If Wells claims that no paperwork was received from RMT during her lifetime to transfer the IRA to RMT they should now accept any needed paperwork from TMT as executor of RMT.  The 50% share of PMC belonged to RMT even in the absence of paperwork.
  • A question for Wells Fargo would be to ask If they have a form on which TMT can certify the name(s) of the children of RMT and that RMT has no surviving spouse.

Submitted by Alan - IRA critic on Tue, 2018-05-22 20:32

Benn, good work. This brings up an interesting question. This agreement is only two years old. Suppose the IRA owner opened the IRA 30 years ago, and through the years the prior agreements were not properly amended with updated agreements. Last year I had acquired so many leaflets announcing various changes, I requested a complete copy of the latest IRA agreements from my custodians and they complied. Nonetheless, have you ever heard of an issue where the IRA owner or beneficiary held an outdated agreement, and a situation similar to the case here occurred and a question arose regarding proper notification of subsequent contract changes. In other words, what is the chance Wells states that this particular IRA contract was not the one you posted? Perhaps Wells during their recent years of dysfunction failed to properly notify IRA owners of contract revisions………the beneficiary provisions might have differed, but still would not have been cause to request a PLR.

Submitted by Ben Meyer on Wed, 2018-05-23 02:13

  • The format of these IRA custodial agreements in many cases seems to be that the first part, Articles I through VII, is taken directly from form 5305-A, the IRS standard form for traditional IRA custodial agreements.  The second part of most custodial agreements is custodian-specific or bank-specific, and contains additional provisions that the provider desires to impose, but which are not contrary to the IRC or Treasury Regulations.  These additional conditions are placed into Article VIII, which is the place designated for bank-specific material by form 5305-A.
  • The format described here doesn’t apply when the IRA custodial or trust aggreement is not based on IRA form 5305 or 5305-A. 
  • The Well-Fargo Custodial Agreement follows the above format.  The section quoted in the post above is Section 4 of Article VIII, so it is part of the material added by Wells Fargo to the standard IRA form of custodial agreement.
  • According to Article VII, “[t]his Agreement will be amended from time to time to comply with the provisions of the [Internal Revenue] Code and the related regulations. Other amendments may be made with the consent of the persons whose signatures appear on the IRA Application.” 
  • The meaning of Article VII seems to be that amendments required by changes of laws or regulations or in response to court decisions may be made unilaterally by the institution.  But other changes that may be desired by the custodian require the approval or consent of the IRA owner.  This creates a recordkeeping dilemma for the custodian if each change that is discretionary for the institution must be affirmatively approved by each IRA holder.  I can’t imagine that an IRA custodian would keep accurate records of approval of each change by each IRA holder, going back possibly several decades.  Therefore, from what I have found, most institutions appear to consider that each change of institution-specific plan provisions is deemed to be consented by the IRA holders, unless they provide a notice to the contrary within some time period such as 30 days.  How they keep track of the non-acceptances after that is anybody’s guess.

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