Handling Complex Beneficiary Claims — Is Your Organization Prepared?
Nothing in life is certain, except death and taxes, Benjamin Franklin once noted. These words ring true if your job involves IRAs. At some point, you will have to handle beneficiary claims when an IRA owner dies.
Beneficiary issues can be challenging, even if you’re a seasoned IRA administrator. Basic death claims still involve rules and processes that you’ll need to feel comfortable with. For example, the first step in processing a death claim requires obtaining a death certificate. You will also need to verify the relationship between the beneficiary and the IRA owner, how old the IRA owner was when he died, and which payout options the beneficiary may be entitled to. Sometimes it’s difficult to even find beneficiaries.
As the IRA administrator, it’s your job to ensure that the inherited assets are properly transferred to the right person or entity. If they are not, your financial organization could be found liable and forced to pay out to the rightful beneficiary.
Beneficiary claims can be further complicated by state law and other relationship entanglements. For example, in many states a divorce could invalidate an IRA beneficiary designation if an ex-spouse is listed as the beneficiary—unless the divorce decree or other court document specifies that the ex-spouse is entitled to the IRA assets.
Death claims also become more complex when a married IRA owner whose residence or IRA is in a community property state does not name her spouse as a primary beneficiary, or, in rare occasions, when a beneficiary is convicted of murdering an IRA owner. Some death claims can also become complicated when beneficiaries live in multiple states or another country.
These issues can make it difficult for smaller financial organizations to stay on top of current IRA rules, both state and federal—especially if they deal with these complex claims only once or twice a year.
Don’t Have a Legal Team That Can Handle Tricky Death Claims? We’ve Got You Covered.
At Ascensus, our ERISA legal team handles hundreds of these escalated death claims for our Fully-Administered clients each year. Because of our expertise, we can recognize these complex claims before some financial organizations may realize the risks. We immediately flag and escalate these claims for further research or processing. Our Fully-Administered program allows financial organizations to take a “hands-off” approach to processing death claims, as well as tax reporting and other back-office tasks. Your team members input the information into our compliance wizards and we take care of the rest, including communicating with your beneficiaries.
If your financial organization uses our forms and documents but would like to step up to other services, including our Fully-Administered program, let’s start the conversation. Contact your sales representative or email us at salessupport@ascensus.com. We can help take the stress out of your IRA administrative responsibilities.
