Trustee Error – Please help!
L1: Trustee Error – Please help!I am an FA. I have a client that is experiencing much difficulty with a distrubtuion error made by my prior firm and my sales assistant.
We have determined that theerror was caused when a computer system within my prior firm merged in June 2007.
Jan 2006: Our client had asked my assistant to send convert his monthly 72T distribution to a lump-sum- Weprocessed the lump-sum request for 2006. However,we did not stop the monthly with any paperwork.We knew that the client would not get the monthly. distributions unless we mannually moved thecash into the distribution side of account…for this to re-start.
Jan 2007: Client calls to do the same thing. Assistant processes request again. All is well we thought.
June 2007: Brokerage firm combines their IRA accounts with the bank distribution side of account. We all knew this was happening. It did not occur to us – nor to anyone- that any old instructions left in the system would automatically be started…without the need for us to mannually move the monies. Without any notification to the client.
So, you can imagine our shock Jan. 2008 when client calls for another lump sum and my assistant sees an additional 21K in the bank account of client. After much investigation…we see that this is due to the merger of the 2 systems June 2007. Client had taken out full annual distribution amount Jan. 2007. Monthly amounts $3600 per month- starts June thru Dec. = 21,000 too much for 2007.
Client was very upset. He had given us verbal instructions to STOP monthly payments. He assumed we had followed thru on his request.
He did received monthly statements – however did not open them- there should have been a zero balance in the bank account. (Client had opened up a bank account only to be used to accept the 72T distributions). After the lump sum distributions…the account balance should have been zero.
We have been trying to get our now prior trustee to correct this for the client. The client wants to give trustee the 21K back. Trustee has refused to assist in correcting 1099 and replacing the funds.
This is a very costly problem for the client. He had been taking out $ 43,200 for the past 4 years. He has approx. 4 more years until age 59.5.
I have been told that a PLR would be a good option to explore. However, client does not have the 20K it would take .
What other options could we explore? Thank you for your thoughts
2009-04-14 01:42, By: MWBW, IP: [188.8.131.52]
L2: Trustee Error – Please help!Have an attorney write a nice request to the former firm for them to pay the cost of the PLR, or be subject to paying all taxes, interest and penalties accruing from the firm’s mistake.2009-04-14 02:35, By: dlzallestaxes, IP: [184.108.40.206]
L2: Trustee Error – Please help!After reading your post several times, my suggestion is for you to get with your current firm’s compliance office and lay out your case completely. It sounds like you, your assistant(s), your previous firm and possibly your current firm have culpability in this case. Any opinions you mayget from this forum is just that … opinions whichwill not carry any weight in your case.
Good luck … you’ll need it.
Jim2009-04-14 14:34, By: Jim, IP: [220.127.116.11]