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This has to do with what *actually* takes place when someone
with Mutual Fund holdings has specified a small charity as beneficiary
for "Transfer On Death" and later dies.
"Transfer On Death" is widely billed as an effective method
of avoiding dreaded probate. And it is (or can be), but ...
Mr. X, with no wife, no children, wishes to bequest his mutual
fund holdings to a small charity with limited personnel and a
valid tax-exempt US fed tax ID. He somehow assumed that he
could submit a TOD beneficiary form with a letter of instruction
specifying the charity, it's tax-id, its bank, routing # and
account #, liquidation of assets, etc such that the mutual fund co.
could wire the proceeds after being presented a death certificate.
No such luck. After making many inquiries, Mr. X finds that the
Mutual Fund companies want the beneficiary to jump thru many, many
hoops.
An excerpt from Fidelity's TOD Designated Beneficiary Agreement/Form:
-----------------------------------------------------------------------
It is the responsibility of each beneficiary designated under the
Agreement to notify Fidelity of the death of the account holder and
to provide in a timely manner: (1) a completed copy of the applicable
Fidelity form; (2) a copy of the death certificate; (3) a tax waiver
if required by state law; and (4) such additional information or
documents as Fidelity may deem necessary or appropriate in its sole
discretion. In some instances, Fidelity may require a certification of
the identity of the beneficiaries from the personal representative of
the estate of the account holder, a beneficiary or representative of
a beneficiary, or any other person deemed appropriate by Fidelity.
Fidelity will have no responsibility for locating beneficiaries. Fidelity
reserves the right to require each beneficiary to open an account at
Fidelity in order to facilitate transfer of the accounts assets and to
execute an indemnification in the amount of the accounts assets.
-----------------------------------------------------------------------
Fidelity won't even contact the beneficiary: they have to contact Fid.
Schwab is not much better. Representatives of neither were the least
familiar with the "Uniform TOD Security Registration Act", apparently
adopted in all involved states. The beneficiary forms/agreements
mention only individuals and trusts: no mention of charities anywhere.
On the one hand, Mr. X understands that the MF co. must protect
itself legally. If they made an improper distribution, they could
be held liable.
On the other hand, all this induces Mr. X to have an in same dream in
which the MF co's require so much ridiculous red-tape stuff of the
beneficiaries that they forget about the bequest -and- the MF co.,
allowing the MF co. to eventually keep and use the bequested assets.
Q1: Is there any general way to circumvent unnecessary red-tape and get a
TOD distribution expedited?
Q2: If not, are there any Mutual Fund companies known to honestly
and regularly expedite TOD distributions?
Thanks,
Peetie
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Peetie Wheatstraw <peetie.wheatstraw@gmail.com> wrote:
Mr. X, with no wife, no children, wishes to bequest his mutual
fund holdings to a small charity with limited personnel and a
valid tax-exempt US fed tax ID. He somehow assumed that he
could submit a TOD beneficiary form with a letter of instruction
specifying the charity, it's tax-id, its bank, routing # and
account #, liquidation of assets, etc such that the mutual fund
co. could wire the proceeds after being presented a death
certificate.
No such luck. After making many inquiries, Mr. X finds that the
Mutual Fund companies want the beneficiary to jump thru many, many
hoops.
Q1: Is there any general way to circumvent unnecessary red-tape
and get a TOD distribution expedited?
It depends on state law. You need to talk to a local lawyer about what
the laws are in your state.
Q2: If not, are there any Mutual Fund companies known to honestly
and regularly expedite TOD distributions?
If those in your state are not cooperative, you might be able to find
one in another state, where the laws may be different, that might be.
As an alternative, I would call the nonprofit and see if they would
have a lawyer create a revocable trust for Mr. X's purpose. They might
either pay for it, or find someone to do it for them for little or no
fee.
Stu
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Mr X wants to leave his assets to a nonprofit.
He wants the mutual fund company to somehow find out about his death
without receiving a death certificate, and to give his assets to the
first person who claims to represent the nonprofit, without requiring
any proof of identity, or requiring an application for transfer of the
securities. And he would like the fund company to ignore any state
legal requirements for tax certifications in the process.
Having gone through all of these "excessive hoops" recently, I expect Mr
X will find that the nonprofit's accountant can complete all the
paperwork in ten minutes or so, and obtain a certified death certificate
for a few dollars. And I doubt Mr X would find any securities company
that would be willing to process a transfer on death without proof of
their customer's death or proof of identity for the beneficiary.
--
josh@phred.org is Joshua Putnam
<http://www.phred.org/~josh/>
Braze your own bicycle frames. See
<http://www.phred.org/~josh/build/build.html>
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This is all quite silly. But I'm partially to blame: didn't
explicitly state that a local relative of Mr. X will get
death cert. and distribute copies to all involved parties.
On Sun, 17 Feb 2008 07:34:32 -0500, <josh@phred.org> wrote:
Mr X wants to leave his assets to a nonprofit.
He wants the mutual fund company to somehow find out about his death
without receiving a death certificate, and to give his assets to the
first person who claims to represent the nonprofit, without requiring
any proof of identity, or requiring an application for transfer of the
securities. And he would like the fund company to ignore any state
legal requirements for tax certifications in the process.
Can you spell "tax-exempt"?
Having gone through all of these "excessive hoops" recently, I expect Mr
X will find that the nonprofit's accountant can complete all the
paperwork in ten minutes or so,
It's a med relief charity: they don't list an accountant in their
annual report.
and obtain a certified death certificate
for a few dollars. And I doubt Mr X would find any securities company
that would be willing to process a transfer on death without proof of
their customer's death or proof of identity for the beneficiary.
I have no problem with these last 2 requirements. It's the others
that give me heartburn (repeated below if anyone cares).
-----------------------------------------------------------------------
It is the responsibility of each beneficiary designated under the
Agreement to notify Fidelity of the death of the account holder and
to provide in a timely manner: (1) a completed copy of the applicable
Fidelity form; (2) a copy of the death certificate; (3) a tax waiver
if required by state law; and (4) such additional information or
documents as Fidelity may deem necessary or appropriate in its sole
discretion. In some instances, Fidelity may require a certification of
the identity of the beneficiaries from the personal representative of
the estate of the account holder, a beneficiary or representative of
a beneficiary, or any other person deemed appropriate by Fidelity.
Fidelity will have no responsibility for locating beneficiaries. Fidelity
reserves the right to require each beneficiary to open an account at
Fidelity in order to facilitate transfer of the accounts assets and to
execute an indemnification in the amount of the accounts assets.
-----------------------------------------------------------------------
S'long,
Peetie
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Peetie Wheatstraw <peetie.wheatstraw@gmail.com> writes:
On Sun, 17 Feb 2008 07:34:32 -0500, <josh@phred.org> wrote:
Can you spell "tax-exempt"?
The tax certifications are with respect to the ESTATE OF THE DECEDENT
so the tax-exempt status of the organization receiving the assets
is irrelevant.
Many states require these certifications to make sure (too much) money isn't
distributed out of an estate before the state gets its cut. This is the same
reason why many states will order safe deposit boxes sealed when the state
learns of the death.
--
Rich Carreiro rlc-news@rlcarr.com
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n article <hvqir3dpfpp5gbksssnl9o08o0jefc3sdr@4ax.com>,
Peetie Wheatstraw <Peetie.Dot.Wheatstraw.at.Gmail.Dot.Com@nlpi061.nbdc.sbc.com>
wrote:
This is all quite silly. But I'm partially to blame: didn't
explicitly state that a local relative of Mr. X will get
death cert. and distribute copies to all involved parties.
On Sun, 17 Feb 2008 07:34:32 -0500, <josh@phred.org> wrote:
Can you spell "tax-exempt"?
It's a med relief charity: they don't list an accountant in their
annual report.
Really? *who* prepared the balance sheet statement in the report? WHO
filed the tax forms? Who did the required SEC, IRS, and state revenue
department filings?
I'm willing to bet they not only have an accountant, but that he's a C.P.A.
and obtain a certified death certificate
for a few dollars. And I doubt Mr X would find any securities company
that would be willing to process a transfer on death without proof of
their customer's death or proof of identity for the beneficiary.
I have no problem with these last 2 requirements. It's the others
that give me heartburn (repeated below if anyone cares).
-----------------------------------------------------------------------
It is the responsibility of each beneficiary designated under the
Agreement to notify Fidelity of the death of the account holder and
to provide in a timely manner: (1) a completed copy of the applicable
Fidelity form; (2) a copy of the death certificate; (3) a tax waiver
if required by state law; and (4) such additional information or
documents as Fidelity may deem necessary or appropriate in its sole
discretion. In some instances, Fidelity may require a certification of
the identity of the beneficiaries from the personal representative of
the estate of the account holder, a beneficiary or representative of
a beneficiary, or any other person deemed appropriate by Fidelity.
Fidelity will have no responsibility for locating beneficiaries. Fidelity
reserves the right to require each beneficiary to open an account at
Fidelity in order to facilitate transfer of the accounts assets and to
execute an indemnification in the amount of the accounts assets.
-----------------------------------------------------------------------
If I understand correctly, you object to:
1) the charity must fill out the brokerage's transfer form to initiate the
transfer..
2) they must show a tax waiver, IF REQUIRED BY LAW to do so.
3) they _may_ require the *estate* to certify that the charity =is=
currently a beneficiary.
4) they *may* require execution of an 'indeminifcation' for the amount
of the assets transferred.
5) they *MIGHT* require the charity to open a brokerage account with
Fidelity to facilitate the transfer.
In order of appearance:
1) *everybody* is going to require notification on their _own_ paperwork.
This way they are assured that they get all the required information,
_and_ that it's organized in the way they expect to look for it.
Unless the beneficary is -routinely- handling the silvver lining from
benefator deaths, they'll spend _much_ more time trying to find out
what information is *LEGALLY*REQUIRED*, and putting it together, then
they would filling out the brokerage form. In short *this* one is
a _LABOR_SAVER_ for the beneficiary. Any brokerage _is_ going to
require 'instructions' to make a disbursement.`
2) Is "non-negotiable". IF the law requires it, it *HAS* to be done.
Every brokeerage will demand it -- they don't have any choice.
And, if it isn't required by law, Fidelity doesn't demand it.
3) This puts no additional burden _on_the_beneficiary_. However, the
brokderage _does_ have a 'fiduciary responsibility' =to=the=estate=,
as the now owner of the account, to see that the assets are distributed
in accordance with the owner's instructions. Requiring the owner to
assert that their intentions are _still_ the same as when originally
recorded is absolutely routine. The brokerage _cannot_ be sure that
the directions _they_ have on record have not ben supereded by something
that they weren't told about, *BUT* they are required to act in accord
with the _currrent_ wishes of the account owner, regardless.
This is a _ONE_SENTENCE_ statement by whomevver is settling the estate.
"I, ______, representative of the estate of _____, do hereby certify
that the bearer of this notification is personally known to me as
___________, the named current beneficiary of the account you hold
in the deceased's name.
Signed,
_________"
Such an outrageous amount of effort to *MAYBE* require -- _if_ the
brokerage "doesn't know" who the beneficary is. In general a brokerage
will require this _ONLY_IF_ they are not sure of the identity of the
beneficiary.
4) This is a 'Cover My Ass' that any brokerage is going to require _IF_
there is any possible uncertainty about the validity of the transfer.
It simply means that 'if we (fidelity) get nailed for an improper
transfer of these assets to you, *YOU* will make good to us for what
you got from us that you shouldn't have.
5) Depending on circumstanes, locale, etc., it _can_ be simpler and easier
for _all_ involved -- *INCLUDING* the beneficiary -- to tranfer from
decedent's account to beneficiary's account and then close beneficiary's
account (via a check payable to 'beneficiary'), than to cut a 'payable
to beneficiary' check directly from decedent's account. This just says
'we reserve the right to do things the _simple_ way, and beneficiary
must help with it.
Summary:
1) is a BENEFIT to the beneficary
2) is REQUIRED BY LAW
3) *IF*REQUESTED* is NO effort for the beneficiary, and only a 'trivial'
effort for whomever is handling the rest of the estate liquidation.
4) Is 'contingency' paperwork. It ensures that ensures that your _real_
wishes are carried out, if you happen to change your mind -after-
telling the brokerage what you want to happen at your death.
5) _if_invoked_, probably makes life easier for the beneficary.`
Items 1 and 2 you are 'stuck with'. They'll be the same absolutely everywhere.
Items 3 and 4 are to ensure that _YOUR_ intentions *are* carried out as you
intend, even in the event that the brokerage is _not_ sure, themselves, pre-
cisely what you meant.
Items 3 and 5 _can_ be bypassed, by the simple expedient of setting up a
minimal asset 'joint' account with the charity as the other owner.
*NOW* the beneficiary is 'fully known' t
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5) they *MIGHT* require the charity to open a brokerage account with
Fidelity to facilitate the transfer.
What happens if the charity *cannot* open such a brokerage account?
For example, the legal requirements for such accounts might require
a USA Social Security number (not a tax ID), and a foreign charity
might not be allowed to get one. (I once stood in line behind some
poor customer trying to deposit an apparently exotic check (which
I didn't see), with a request from the teller for a picture ID,
"and it had better have a picture of the bank on it". I hope the
teller simply didn't know what he was talking about.)
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In article <lf7or3pran2p1pplcqkt1rknr47f2jvvaj@4ax.com>,
Gordon Burditt <gordon@hammy.burditt.org> wrote:
5) they *MIGHT* require the charity to open a brokerage account with
Fidelity to facilitate the transfer.
What happens if the charity *cannot* open such a brokerage account?
For example, the legal requirements for such accounts might require
a USA Social Security number (not a tax ID),
Strawman -- if true, _no_ corporate entity could open an account. Nice
try though.
and a foreign charity
might not be allowed to get one. (I once stood in line behind some
poor customer trying to deposit an apparently exotic check (which
I didn't see), with a request from the teller for a picture ID,
"and it had better have a picture of the bank on it". I hope the
teller simply didn't know what he was talking about.)
There is a _LOT_ more to that story than what you reportedly overheard.`
UNIVERSAL practice, if a teller doesn't know how to deal with an instrument
that was presented, is to refer that customer to a _bank_officer_. The
bank officer may talk to other in-house officials (e.g. a department with
a name something like 'clearance', 'settlements', 'collections' [which
has -nothing to do with debt-collection], etc.), or possibly a phone call
to the Federal Reserve clearinghouse.
Additionally, if the 'customer' _is_ a customer of that bank, then he has
already established *HIS* identity to the satisfaction of the bank, and
they have issued him an ID to confirm it. Presenting the bank-issued
photo-ID to the bank employee is simply a shortcut for that employee to
confirm that the prior Identification information collected does apply to
the person 'pictured', who also _is_ the person in front of them.
I see three viable explanations for the scene you reported:
1) teller and customer were familiar with each other, and teller was
"pulling customer's leg".
2) 'customer' was _not_ a bank customer, and instrument in question was
*NOT* drawn on that bank. And the non-customer was being a PITA when
told they didn't cash instruments (that were _not_ drawn on that bank)
for non-customers.
3) 'transcription error' between lips and ears. e.g. payee name was "Bank".
I'm not going to speculate on relative probabilities. <grin>
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In article <a3b5s39o8v9cug7d9ba7p5n50mgk8gtb35@4ax.com>,
Robert Bonomi <bonomi@host122.r-bonomi.com> wrote:
In article <lf7or3pran2p1pplcqkt1rknr47f2jvvaj@4ax.com>,
Gordon Burditt <gordon@hammy.burditt.org> wrote:
(I once stood in line behind some
poor customer trying to deposit an apparently exotic check (which
I didn't see), with a request from the teller for a picture ID,
"and it had better have a picture of the bank on it". I hope the
teller simply didn't know what he was talking about.)
There is a _LOT_ more to that story than what you reportedly overheard.`
UNIVERSAL practice, if a teller doesn't know how to deal with an instrument
that was presented, is to refer that customer to a _bank_officer_.
Agreed.
Additionally, if the 'customer' _is_ a customer of that bank,
I think that would be implied by "deposit".
I see three viable explanations for the scene you reported:
Possible.
2) 'customer' was _not_ a bank customer,
Then into what would the exotic check be deposited?
Seth
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