$108,000 account "found" 21 years after dad's death! | Ed Slott and Company, LLC

$108,000 account "found" 21 years after dad's death!

AUL (Indianapolis, IN), is apparently scouring their orphaned contracts with the Social Security Data Base and sent a letter to the deceased's last known address--which just happens to be his granddaughter's house today. Decedent died in 1991(at age 75) and no-one in the family knew about this asset, so it never was included in the estate, etc.. Account value today is $108,000. AUL says their records are few, they have no application, no beneficiary form on file. They call the plan a Deferred Settlement Options TDA, however they can not verify the source of the money, neither can the only living son (who was the estate executor in 1991). Based on the Death Benefit form sent by AUL, it seems to indicate that this contract is deferred, qualifed dollars, as the only options are full payout, rollover to spousal IRA, non-spousal rollover to inherited IRA. So, Guru's out there, what to do? 1) Re-open the estate 21 years after death? (AUL has limited info, and no value for the DOD), 2) Do the IRC laws of 1991 apply as that was the year of death (so, no inherited IRA back then), or, 3) Do the current laws with an inherited IRA apply?, 4) Will or should there be a penalty as no distribution was taken with-in five years of the death of the decedent?, 5) Their was one other son alive at the time of the decedent's death, that son has since died in 2000 and his wife and one daugther survives today, 6) The AUL service representative said to just have the remaining son complete the beneficiary form as he desires (#

This really seems mysterious. There is no way to know what this asset was worth in 1991 - I'd guess that it's not enough so that estate tax would have been owed on it 21 years ago. Apparently the custodian is looking for a beneficiary not the estate - so there would be no income tax reason to reopen the estate. The 5-year rule never applied to a plan participant or IRA owner over age 70-1/2 so that's not a worry. The regulations in place in 1991 were adopted in 1987 and were still in force until 2002. The life expectancy payout period was based on the beneficiary's age when the owner reached age 70-1/2; so you can get an idea of where you'd be on a life expectancy payout basis. The IRS has been very lenient on waiving 50% penalties, but they won't waive them until the missed RMDs are withdrawn. So some calculations would be involved - difficult when you don't know balances as of earlier years. If the custodian thinks that the surviving brother can execute the distribution documents, I'd think that you'd do that. The family may need to come to some agreement as to how the funds will be distributed especially if the brother must pay income taxes on the found asset. Good luck,

Find members of Ed Slott's Elite IRA Advisor GroupSM in your area.
We neither keep nor share your information entered on this form.

I agree to the terms and services:

You may review the terms and conditions here.