How does a club document who the beneficiary is for a deceased member?
Robert E. Adams (Mary) on
As the new treasurer of a club with several members in their 80's, I bought this up as new business at our last meeting. Most of them suggested that the executor of the
Will would tell me what to do! Myself and a few others felt that each member should provide a notarized document stating who their beneficiaries are. The reason being that
each of our individual stock brokers request that information. What does Bivio recommend? What do other clubs do?
Jeanne E Tieken on
We capture that information as soon as they join. At tax
time we remind all
members to update that information if it has changed. We
have not requested that the info be notarized.
ira smilovitz on
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives. Unless your state allows for TOD designations (not all do) and you know exactly what you are doing (that is, the language of your TOD designation follows state law precisely), your club runs a significant risk. Although I am not an attorney, and this is not legal advice, the language of a decedent's Will governs the distribution of a decedent's assets AFTER the satisfaction of any enforceable obligations and generally trumps any other designation. A club should only act on the instructions of the legal representative of the Estate after that representative has adequately demonstrated that s/he has the appropriate authority. If the club transfers a member's share to the "wrong" beneficiary, the club and/or any one or more individual members can be sued by the Estate to recover the misdirected funds.
The model investment club partnership agreement provides a suitable alternative to waiting for the Estate executor to demonstrate authority to act on behalf of the Estate. It directs the club to treat the death as a request for a full withdrawal. By making the proceeds payable to the decedent, it then becomes the executor's responsibility to determine the ultimate distribution of the assets.
I find it unusual that a broker would require a beneficiary designation as the brokers that I have encountered insist on tend to be most resistant to action until they are satisfied that every "i" is dotted and every "t" crossed.
As the new treasurer of a club with several members in their 80's, I bought this up as new business at our last meeting. Most of them suggested that the executor of the
Will would tell me what to do! Myself and a few others felt that each member should provide a notarized document stating who their beneficiaries are. The reason being that
each of our individual stock brokers request that information. What does Bivio recommend? What do other clubs do?
Laurie Frederiksen on
Ira is absolutely correct. We do not recommend that clubs have
beneficiary forms. If someone passes away, process it as a request for
full withdrawal and make your payout "To the estate of _____" , then let
the estate distribute the assets. You don't want to take the risk of
getting everyone in your club in the midst of any sort of estate
dispute.
On Fri, Oct 10, 2014 at 9:10 AM, ira smilovitz wrote:
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives.
Kimberly Hazen on
Same for us. We have a "new member" form with SSN, beneficiary, address, etc. I keep them in a locked file cabinet to protect the information.
We capture that information as soon as they join. At tax
time we remind all
members to update that information if it has changed. We
have not requested that the info be notarized.
Kimberly Hazen on
Hmmm...this is good to know. I think when we set up our club years ago, we followed the "Beardstown Ladies" book (remember that). I think that's where the beneficiary stuff came from. I'll have to let our members know.
On Fri, Oct 10, 2014 at 8:17 AM, Laurie Frederiksen <laurie@bivio.biz> wrote:
Ira is absolutely correct. We do not recommend that clubs have
beneficiary forms. If someone passes away, process it as a request for
full withdrawal and make your payout "To the estate of _____" , then let
the estate distribute the assets. You don't want to take the risk of
getting everyone in your club in the midst of any sort of estate
dispute.
On Fri, Oct 10, 2014 at 9:10 AM, ira smilovitz wrote:
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives.
Edgar Berners on
In my club one member wanted to transfer his account to a revocable living trust that satisfies the restrictions recommended by bivio. The member has a trust because he does not want to have an estate that would be subject to probate. Bivio recommends that on his death the club should pay his account to his estate, thus creating an estate. We are working on amending our partnership agreement now, to write a procedure for paying an account that is in a trust. I would really appreciate any help with doing that. We normally pay withdrawn accounts by transferring securities to an account set up at the club's broker. The lawyers at the member's trust say that we can't make them set up a broker account to receive the transfer.
Ed Berners
sjvalley
in South Bend, IN
From: Laurie Frederiksen <laurie@bivio.biz> To: The Club Cafe <club_cafe@bivio.com> Sent: Friday, October 10, 2014 9:17 AM Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
Ira is absolutely correct. We do not recommend that clubs have
beneficiary forms. If someone passes away, process it as a request for
full withdrawal and make your payout "To the estate of _____" , then let
the estate distribute the assets. You don't want to take the risk of
getting everyone in your club in the midst of any sort of estate
dispute.
On Fri, Oct 10, 2014 at 9:10 AM, ira smilovitz wrote:
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives.
Irina Clements on
Many times there is a pour over will with trusts so that assets not under the trust can be provided for. Changing your bylaws for one person seems a bit much. And, does add extra work potentially for your treasurer.
In my club one member wanted to transfer his account to a revocable living trust that satisfies the restrictions recommended by bivio. The member has a trust because he does not want to have an estate that would be subject to probate. Bivio recommends that on his death the club should pay his account to his estate, thus creating an estate. We are working on amending our partnership agreement now, to write a procedure for paying an account that is in a trust. I would really appreciate any help with doing that. We normally pay withdrawn accounts by transferring securities to an account set up at the club's broker. The lawyers at the member's trust say that we can't make them set up a broker account to receive the transfer.
Ed Berners
sjvalley
in South Bend, IN
From: Laurie Frederiksen <laurie@bivio.biz> To: The Club Cafe <club_cafe@bivio.com> Sent: Friday, October 10, 2014 9:17 AM Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
Ira is absolutely correct. We do not recommend that clubs have
beneficiary forms. If someone passes away, process it as a request for
full withdrawal and make your payout "To the estate of _____" , then let
the estate distribute the assets. You don't want to take the risk of
getting everyone in your club in the midst of any sort of estate
dispute.
On Fri, Oct 10, 2014 at 9:10 AM, ira smilovitz wrote:
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives.
Laurie Frederiksen on
Hi Ed,
It sounds like that is something your club needs to decide.
It is in the best interest of the rest of the club members to transfer
appreciated stocks to fund a full withdrawal. If that is not possible
with this members trust, you'll need to determine whether or not you
want to allow his account to be titled that way.
I wonder
if you can just require him to open the brokerage account in the trusts
name now so it is available if you need to use it.
It's an interesting question.
Laurie Frederiksen Invest with your friends! www.bivio.com
On Wed, Oct 15, 2014 at 12:46 PM, Edgar Berners wrote:
In my club one member wanted to transfer his account to a revocable living trust that satisfies the restrictions recommended by bivio. The member has a trust because he does not want to have an estate that would be subject to probate. Bivio recommends that on his death the club should pay his account to his estate, thus creating an estate. We are working on amending our partnership agreement now, to write a procedure for paying an account that is in a trust. I would really appreciate any help with doing that. We normally pay withdrawn accounts by transferring securities to an account set up at the club's broker. The lawyers at the member's trust say that we can't make them set up a broker account to receive the transfer.
Ed Berners
sjvalley
in South Bend, IN
Mike Jones on
If the member has an account in the name of the trust with a broker other than that used by the club, you can still transfer securities to it. There may be additional cost to the club as compared to setting up an account with the same broker your club uses, but that would become the member's price to bear to avoid probate.
Mike Jones
Wall$treet Wannabees
Bloomington, MN
From: Edgar Berners <eberners76@sbcglobal.net> To: "club_cafe@bivio.com" <club_cafe@bivio.com> Sent: Wednesday, October 15, 2014 11:46 AM Subject: Re: [club_cafe] How does a club document who the beneficiary is for a
deceased member?
In my club one member wanted to transfer his account to a revocable living trust that satisfies the restrictions recommended by bivio. The member has a trust because he does not want to have an estate that would be subject to probate. Bivio recommends that on his death the club should pay his account to his estate, thus creating an estate. We are working on amending our partnership agreement now, to write a procedure for paying an account that is in a trust. I would really appreciate any help with doing that. We normally pay withdrawn accounts by transferring securities to an account set up
at the club's broker. The lawyers at the member's trust say that we can't
make them set up a broker account to receive the transfer.
Ed Berners
sjvalley
in South
Bend, IN
From: Laurie Frederiksen <laurie@bivio.biz> To: The Club Cafe
<club_cafe@bivio.com> Sent: Friday, October 10, 2014 9:17 AM Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
Ira is absolutely correct. We do not recommend that clubs have
beneficiary forms. If someone passes away, process it as a request for
full withdrawal and make your payout "To the estate of _____" , then let
the estate distribute the assets. You don't want to take the risk of
getting everyone in your club in the midst of any sort of estate
dispute.
On Fri, Oct 10, 2014 at 9:10 AM, ira smilovitz wrote:
You should NOT have any designated beneficiaries. It isn't the club's responsibility to determine the adequacy and/or legality of any instructions it receives.
ira smilovitz on
I received the following from someone who has been following the discussion but can't seem to respond directly to the discussion...
I have noticed several clubs asking the best way to handle closing
out the account in case of death.
In the past, I was Treasurer
for several years in an Investment Club and we asked the same question: What
do we do in the case of death?
The answer (from a couple attorneys and
people in general) you make out the check in the amount owing at that time
if the member were to withdraw. You make it out to: The Estate of Mary Doe
or John Doe. Then it goes to the family attorney.
Works very
well. (And you do not get in the middle of any legal matters.)
In case it matters, this reply comes from someone in Arizona, though I believe this advice is good everywhere.
Ira Smilovitz
Jack Ranby on
The advice in Ira's email below applies when an individual is a partner in the club.
When the club allows a revocable trust to be the partner, it is the trust, not a person, which is the legal partner. The person who comes to the meetings is there in a representative capacity as trustee of the trust. The partnership agreement should provide that the death of the trustor, the person who established the trust, will be treated as a notice of withdrawal on behalf of the trust. The check disbursing the trust's value in the partnership should be made payable to the trust; not the estate of the trustor or a trustee.
Jack Ranby
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz Sent: Wednesday, October 15, 2014 1:41 PM To: club_cafe@bivio.com Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
I received the following from someone who has been following the discussion but can't seem to respond directly to the discussion...
I have noticed several clubs asking the best way to handle closing out the account in case of death.
In the past, I was Treasurer for several years in an Investment Club and we asked the same question: What do we do in the case of death?
The answer (from a couple attorneys and people in general) you make out the check in the amount owing at that time if the member were to withdraw. You make it out to: The Estate of Mary Doe or John Doe. Then it goes to the family attorney.
Works very well. (And you do not get in the middle of any legal matters.)
In case it matters, this reply comes from someone in Arizona, though I believe this advice is good everywhere.
Ira Smilovitz
ira smilovitz on
Jack,
That makes a great deal of sense.
Ira Smilovitz
On Wed, Oct 15, 2014 at 10:35 PM, Jack Ranby <ranby@azbar.org> wrote:
The advice in Ira's email below applies when an individual is a partner in the club.
When the club allows a revocable trust to be the partner, it is the trust, not a person, which is the legal partner. The person who comes to the meetings is there in a representative capacity as trustee of the trust. The partnership agreement should provide that the death of the trustor, the person who established the trust, will be treated as a notice of withdrawal on behalf of the trust. The check disbursing the trust's value in the partnership should be made payable to the trust; not the estate of the trustor or a trustee.
Jack Ranby
From:club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz Sent: Wednesday, October 15, 2014 1:41 PM To:club_cafe@bivio.com Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
I received the following from someone who has been following the discussion but can't seem to respond directly to the discussion...
I have noticed several clubs asking the best way to handle closing out the account in case of death.
In the past, I was Treasurer for several years in an Investment Club and we asked the same question: What do we do in the case of death?
The answer (from a couple attorneys and people in general) you make out the check in the amount owing at that time if the member were to withdraw. You make it out to: The Estate of Mary Doe or John Doe. Then it goes to the family attorney.
Works very well. (And you do not get in the middle of any legal matters.)
In case it matters, this reply comes from someone in Arizona, though I believe this advice is good everywhere.
Ira Smilovitz
Robert Shaw on
There is another aspect to this situation. What happens when the trust has co-trustees? If only one of the co-trustees is the club partner what about the non-partner co-trustee? It seems that the non-partner co-trustee is a non-partner partner because of the terms of the trust. Does the club want a non-member (the non-partner co-trustee) who may have voting rights in the club because the trust is considered the real member? We do not allow trusts that have more than one trustee.
Bob
On Oct 16, 2014, at 1:11 AM, ira smilovitz wrote:
Jack,
That makes a great deal of sense.
Ira Smilovitz
On Wed, Oct 15, 2014 at 10:35 PM, Jack Ranby <ranby@azbar.org> wrote:
The advice in Ira's email below applies when an individual is a partner in the club.
When the club allows a revocable trust to be the partner, it is the trust, not a person, which is the legal partner. The person who comes to the meetings is there in a representative capacity as trustee of the trust. The partnership agreement should provide that the death of the trustor, the person who established the trust, will be treated as a notice of withdrawal on behalf of the trust. The check disbursing the trust's value in the partnership should be made payable to the trust; not the estate of the trustor or a trustee.
Jack Ranby
From:club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz Sent: Wednesday, October 15, 2014 1:41 PM To:club_cafe@bivio.com Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
I received the following from someone who has been following the discussion but can't seem to respond directly to the discussion...
I have noticed several clubs asking the best way to handle closing out the account in case of death.
In the past, I was Treasurer for several years in an Investment Club and we asked the same question: What do we do in the case of death?
The answer (from a couple attorneys and people in general) you make out the check in the amount owing at that time if the member were to withdraw. You make it out to: The Estate of Mary Doe or John Doe. Then it goes to the family attorney.
Works very well. (And you do not get in the middle of any legal matters.)
In case it matters, this reply comes from someone in Arizona, though I believe this advice is good everywhere.
Ira Smilovitz
Jack Ranby on
Bob:
Your question misses a fundament concept when a trust is involved. A trustee is not a partner in the partnership so there is no such thing as a partner trustee or a non-partner trustee. No trustee is a partner in the partnership, but merely the representative of the partner trust.
With a simple revocable living trust of the type investment clubs will usually be dealing with, the person who created it, the trustor, is also the trustee so long as he or she is living. Therefore, by providing that the death of the trustor is the equivalent of a request to withdraw, the same as the death of an individual partner, the club avoids the issue of having the trust continue as a partner with a substitute trustee.
You say your club only allows trusts which have one trustee. Most revocable living trusts created to avoid probate are family trusts that include both spouses as co trustees. I believe most investment clubs that want to accommodate their members’ desire to have their shares in the investment club partnership included in the trust cannot place a one trustee limit on the practice. Having more than one trustee does not give the trust anymore voting rights in the partnership than if it were an individual so that should not be a concern.
Jack Ranby
From: club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of Robert Shaw via bivio.com Sent: Thursday, October 16, 2014 4:16 AM To: club_cafe@bivio.com Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
There is another aspect to this situation. What happens when the trust has co-trustees? If only one of the co-trustees is the club partner what about the non-partner co-trustee? It seems that the non-partner co-trustee is a non-partner partner because of the terms of the trust. Does the club want a non-member (the non-partner co-trustee) who may have voting rights in the club because the trust is considered the real member? We do not allow trusts that have more than one trustee.
Bob
On Oct 16, 2014, at 1:11 AM, ira smilovitz wrote:
Jack,
That makes a great deal of sense.
Ira Smilovitz
On Wed, Oct 15, 2014 at 10:35 PM, Jack Ranby <ranby@azbar.org> wrote:
The advice in Ira’s email below applies when an individual is a partner in the club.
When the club allows a revocable trust to be the partner, it is the trust, not a person, which is the legal partner. The person who comes to the meetings is there in a representative capacity as trustee of the trust. The partnership agreement should provide that the death of the trustor, the person who established the trust, will be treated as a notice of withdrawal on behalf of the trust. The check disbursing the trust’s value in the partnership should be made payable to the trust; not the estate of the trustor or a trustee.
Jack Ranby
From:club_cafe@bivio.com [mailto:club_cafe@bivio.com] On Behalf Of ira smilovitz Sent: Wednesday, October 15, 2014 1:41 PM To:club_cafe@bivio.com Subject: Re: [club_cafe] How does a club document who the beneficiary is for a deceased member?
I received the following from someone who has been following the discussion but can't seem to respond directly to the discussion...
I have noticed several clubs asking the best way to handle closing out the account in case of death.
In the past, I was Treasurer for several years in an Investment Club and we asked the same question: What do we do in the case of death?
The answer (from a couple attorneys and people in general) you make out the check in the amount owing at that time if the member were to withdraw. You make it out to: The Estate of Mary Doe or John Doe. Then it goes to the family attorney.
Works very well. (And you do not get in the middle of any legal matters.)
In case it matters, this reply comes from someone in Arizona, though I believe this advice is good everywhere.