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 account?s assets and to execute an indemnification in the amount of the account?s 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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