There is no beneficiary on IRA account. I am [the] executor of [a] Will and Trust. I sent Morgan Stanley a copy of [the] notarized letter that was with [the] Will and Trust Stating that the IRA [assets are to] go into Trust. Morgan Stanley states that [since] they did not have copy of this letter before her death the money will go to her son. She did not want this [as] there is very bad blood [between them].
While this may seem unfair, brokerage firms are bound by federal and state law regarding the distribution of assets after death. They also have to worry about potentially being sued if they do something a potential beneficiary might not like, in this case her son. As a result, Morgan Stanley is likely interpreting the law based partially on a concern over being sued by the son. Fortunately, the law will also offer the solution.
Seek Legal Guidance
You will want to have an attorney help you with working with Morgan Stanley as the brokerage firm is likely to ignore arguments that don’t come from an attorney. Additionally, an estate attorney will be able to look at the actual documents and give legal advice based on your exact fact pattern.
If there is an attorney appointed by the probate court or one who is helping you in your capacity as executor, bring them the Morgan Stanley IRA documents, the notarized letter, and the letter from Morgan Stanley. You can also approach the attorney who originally drafted the Will & Trust as they are likely to already be familiar with the deceased’s wishes.
While you may want to avoid getting an attorney, this is an area where you will need one. To get help with this matter you will need someone who understands the details of the case. With such limited information from your question, this answer is solely for general educational purposes and is definitely not legal advice for your situation. The nice thing is, the attorney fees likely won’t come out of your pocket as it is normal for an estate to for the cost of the attorney when the executor needs legal advice in discharging their duties.
Send the IRA to the Estate
If Morgan Stanley still won’t allow the IRA to go into the trust, you can ask them to put the IRA into the estate of the deceased. This will put the decision in the hands of the probate judge, which may help Morgan Stanley to absolve themselves of the legal liabilities. A judge then would be more likely to follow the direction in the Will (assuming the will was properly drafted). This will have tax consequences so you will also want to consult with a financial planner or a CPA before you proceed.
Joshua Escalante Troesh is a tenured professor of Business at El Camino College and the founder of Purposeful Finance. He is also the owner of Purposeful Strategic Partners, a fiduciary and fee-only financial planning firm and a Registered Investment Advisor. He can be reached for comment at firstname.lastname@example.org