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How does a club document who the beneficiary is for a deceased member?
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?
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.
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.

Ira Smilovitz

On Thu, Oct 9, 2014 at 8:59 PM, Robert E. Adams (Mary) <adamsre@telstar-online.net> wrote:
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?

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.

Here is even more information on this topic:
Beneficiaries in Investment Clubs


Laurie Frederiksen
Invest with your friends!
www.bivio.com

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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.

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.



Kimberly Hazen
cell 608.444.6898

On Fri, Oct 10, 2014 at 7:34 AM, Jeanne E Tieken <jeannetieken@gmail.com> wrote:
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.

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.

Thanks, Kimberly


Kimberly Hazen
cell 608.444.6898

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.

Here is even more information on this topic:
Beneficiaries in Investment Clubs


Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+


Click here to
Subscribe to the Club Cafe email list. Click here to Unsubscribe


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.


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.

Here is even more information on this topic:
Beneficiaries in Investment Clubs


Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/bivio
Follow Us on Google+


Click here to
Subscribe to the Club Cafe email list.  Click here to  Unsubscribe




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.



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.

Be Well. Irina Sent from my iPad

On Oct 15, 2014, at 12:46 PM, Edgar Berners <eberners76@sbcglobal.net> 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


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.

Here is even more information on this topic:
Beneficiaries in Investment Clubs


Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/bivio
Follow Us on Google+


Click here to
Subscribe to the Club Cafe email list.  Click here to  Unsubscribe




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.



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

Become our Facebook friend! www.facebook.com/bivio
Follow us on twitter! www.twitter.com/bivio
Follow Us on Google+

Click here to Subscribe to the Club Cafe email list. Click here to Unsubscribe



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


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.

Here is even more information on this topic:
Beneficiaries in Investment Clubs


Laurie Frederiksen
Invest with your friends!
www.bivio.com

Become our Facebook friend!  www.facebook.com/bivio
Follow us on twitter!  www.twitter.com/bivio
Follow Us on Google+


Click here to
Subscribe to the Club Cafe email list.  Click here to  Unsubscribe




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.





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

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,

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


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



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.

 

Ira Smilovitz