Non Spouse IRA Beneficiary Rules Question

[DHK]

It depends on how you hold yourself out to the public. You can be held liable to a fiduciary duty if you say that you are an expert. If you have designations to hold yourself at a higher level than non-credentialed people, you can be held liable to a fiduciary duty.

When you are acting on behalf of beneficiaries, you are acting in the duty of a fiduciary. That's the purpose of a trust (for comparison purposes), and once an IRA owner dies, the money is held "in trust" for the beneficiaries until they have received the proceeds.

And the insurance company, choosing not to respond or assist you in fulfilling your fiduciary duty, has become a hindrance to fulfilling that duty.

Yes, it truly is a fiduciary duty and role that the advisor/agent is trying to fulfill. You may not, and don't have to be, a fiduciary at the time of sale, but working with beneficiaries of a retirement plan, you certainly are acting in such a capacity.

 

[Tahoe Ray]

Sorry for being picky here but the insurance does not have a fiduciary duty to help. If they did, there would thousand of lawsuits over unclaimed life insurance payouts. Most likely under each State insurance laws they have to just make a reasonable attempt to answer inquiries and respond to any legal requests. They will respond to an estate lawyer but not because they have any fiduciary duty.

To be fair, that has already happened:

http://www.lifehealthpro.com/2012/02/01/prudential-metlife-sued-over-death-master-file

 

[CALTCAgent]

Regarding Fiduciary responsibility, I was reading Publication 590-B, it says:

CH1, page 22-Fiduciary includes anyone who does the following:

Has any discretionary authority or discretionary responsibility in administering your IRA.

Not sure if this applies to the insurance carrier. Maybe the word discretionary could be an issue.

 

[walthamny]

DHK, I agree with what you posted last. However, the earlier posting implies that the insurance carrier has fiduciary responsibility when a policy owner dies. That is simply not the case. Insurance companies are not fiduciaries when the policy owner dies. They just have to follow state insurance guidelines and state case law, that is in most cases don't do anything that pisses of the state insurance division.

 

[DHK]

"This is a revolution, dammit! We're going to have to offend SOMEBODY!" - John Adams, 1776 Musical


All I'm talking about is a way to intimidate the person you're talking to on the other end of the line into giving you the information you need to serve the needs of the beneficiaries of the annuity contract. This, in and of itself, is a fiduciary duty. Because the insurance company in question (who has been nameless so far) has not been cooperative in giving the information needed, you need to insinuate that they will be threatened as a company and individually in a complaint for simply not being helpful to beneficiaries. Either they help, or they'll be served.

Whether anyone has a legal fiduciary duty or not... is irrelevant. The fact is, service and information is being withheld from the agent/advisor from being able to serve their client's beneficiaries. It's stupid.

So you intimidate them. That's why you get the estate planning attorney involved to write a letter, if necessary, to get them to cooperate... or else.

 

[scagnt83]

You guys are talking about two different things. Finding a beneficiary who is missing is a totally different situation than providing the correct tax/regulatory info to the owner of an IRA who is actively asking you this time sensitive question.

There are different types of fiduciaries and fiduciary duties. When dealing with an IRA both the agent and the insurance company do have a fiduciary duty when it comes to the administration of the contract. That includes answering and resolving any issues that the client brings up to you in a timely and prudent manner.

So yes, the insurance company does have a fiduciary duty to answer this question for the client in a correct and timely fashion.

That is different than being considered a fiduciary when making recommendations during the sales process.

 

[CALTCAgent]

An update on this case, a rep at the insurance carrier is saying that in Pub 590B it says that a beneficiary must make an election between the 5 year rule and RMD's by 12/31 of the year the beneficiary must take the required distribution.

If this election is not taken by the 12/31 date, it is too late and you must now lump sum out as you missed the election.

However, the 5 year rule was not a possible election. The owner died on or after the required beginning date, only an RMD on the longer life expectancy between the beneficiary or the owner was possible.

No choice or election involved ?

I have included excerpts of 2 sections from pub 590B that pertain to this below.

Individual designated beneficiaries. The terms of
most IRA plans require individual designated beneficiaries
to take required minimum distributions using the life expectancy
rules (explained earlier) unless such beneficiaries
elect to take distributions using the 5-year rule. The
deadline for making this election is December 31 of the
year the beneficiary must take the first required distribution
using his or her life expectancy (or December 31 of
the year containing the fifth anniversary of the owner's
death, if earlier).

Owner Died On or After Required Beginning
Date

If the owner died on or after his or her required beginning
date (defined earlier), and you are the designated beneficiary,
you must base required minimum distributions for
years after the year of the owner's death on the longer of:
Your single life expectancy shown on Table I in Appendix
B as determined under Beneficiary an individual,
later, or
The owner's life expectancy as determined under
Death on or after required beginning date, under Beneficiary
not an individual, later.