Missing the paperwork on your IRAs? All is not lost
Dear Liz: I have four daughters, now in their late 30s and early 40s. When they were very young, I started investing for them. As they began to earn their own money, I started Roth IRAs for them as well.
A decade ago, due to an unexpected divorce, a 30-day escrow and a move, I lost the paperwork for their accounts. After the investment company was acquired by another in 2015, I forwarded the new company’s contact information to my daughters. One transferred her account to another investment company, while her sisters left theirs in place.
Recently I found the old investment paperwork. The company has changed hands again, but the new company says it has no information about my three other daughters’ accounts. Can anything be done?
Answer: Since the latest company can’t find the accounts, your daughters should contact the escheat office of the state where you lived before your move.
Perhaps you didn’t update your address with the original company when you moved and the account statements or other mail were returned as undeliverable. If the company and its successor couldn’t find you — and some companies don’t look very hard — the accounts would be considered unclaimed and would have to be turned over to the state.
Links to state escheat offices can be found online at unclaimed.org, the website for the National Assn.
of Unclaimed Property Administrators.
The good news is that there’s no time limit for claiming previously unclaimed property.
The bad news is that some states will liquidate stocks and other investments after escheatment. If that’s the case, then the three daughters who didn’t move their accounts will have missed out on nearly a decade of investment returns.
Dear Liz: Is it common for a brokerage agreement to say the firm can close my account for any reason and without any notice? The agreement goes on to say that the brokerage can liquidate the investments in my account if it’s closed and that the brokerage is not responsible for any investment losses that result.
Answer: The short answer is yes — brokerage accounts can be closed at any time by the firm or by the client.
Such agreements often specify certain actions that can trigger a closure, such as failing to maintain a minimum required balance. But the agreements also typically have language that allows the brokerage to close your account at any time and for any reason.
Brokerages don’t commonly close customer accounts. If yours does, however, move quickly to transfer your investments to another firm.
Failure to act could result in your investments being liquidated, and you would owe capital gains taxes on any appreciation in their value.
Dear Liz: You have written that non-spouse beneficiaries are now required to drain their inherited IRAs within 10 years. Is this requirement retroactive?
I inherited an IRA from my mother in 2015. I have been taking out the minimum required each year. If I must drain the account within 10 years, will the increase in yearly income affect my Social Security benefits?
Answer: The 10-year requirement applies only to accounts inherited from people who died after Dec. 31, 2019.
IRA distributions don’t affect Social Security benefits, but could affect Medicare premiums if the withdrawal is large enough. Taxable income above certain limits triggers a Medicare surcharge known as an income-related monthly adjustment amount, or IRMAA.
Dear Liz: My husband passed away 10 months ago. I applied for widow benefits.
The Social Security Administration sent me a letter that said they cannot pay because my Social Security benefit would equal two-thirds of the amount of my pension. Please help me with this.
Answer: This is known as the government pension offset, and it applies to people who receive a pension from a job that didn’t pay into Social Security. Any survivor or spousal benefits you might receive are reduced by two-thirds of the pension amount. In your case, your entire benefit was offset.
People are understandably upset to learn they don’t qualify for survivor or spousal benefits through Social Security. But since your pension is large enough to offset any benefit, you’re financially better off with the pension than without it.
For more information, see the government pension offset pamphlet, available online at SSA.gov/pubs or by calling the Social Security Administration toll-free at (800) 772-1213.
