As divorce attorneys, we often see litigation and settlement questions regarding individual retirement accounts (IRAs). A pension plan, IRA, or other type of account is considered marital property for purposes of distribution during a divorce.
New questions may arise, however, where unmarried persons engaged in a romantic partnership seek to designate each other as beneficiaries of an IRA. In a recent opinion, the Massachusetts Appeals Court addressed an issue concerning an IRA beneficiary who was the former romantic partner of the decedent, whose IRA account was in question.
In UBS Financial Services, Inc. v. Aliberti, three different IRA accounts were in question, in the amounts of $31,000, $18,000, and $276,000, respectively. The account holder originally designated his romantic partner (party to the suit) as beneficiary of all three accounts. In November 2013, the account holder expressed a desire to name additional beneficiaries, and he sent back completed and signed designation update forms for the two smaller accounts, but not the third one. The updated forms designated an additional primary beneficiary and two additional contingent beneficiaries, but they also indicated that each beneficiary should receive a 25% share of the account proceeds. UBS asked the account holder to clarify whether he meant to list each of the four as primary beneficiaries. The account holder did not respond and unexpectedly died the following month. The romantic partner then contacted the account administrator regarding each of the IRA accounts and requested that all funds be distributed to her as the sole beneficiary.
The administrator of the accounts happened to be the decedent’s former sister-in-law, who worked at UBS as a financial advisor. Although the beneficiary reached out to the administrator to check on the status of her claim, the administrator never provided a status update. Instead, she sent to the beneficiary several text messages with responses such as: “How big of a whore are you,” “You are the most worst piece of filth I have ever encountered,” and, “Are you so eager to grab the money. Did you even notice his death certificate is wrong? Oh no you were too busy ransacking.”
The Court agreed with the beneficiary that UBS unlawfully withheld from her the proceeds from the largest IRA account, for which the Court noted that UBS never received any documentation naming anyone other than the romantic partner as beneficiary. “ Considering the time value of money and the fact that no investment decisions were made regarding the largest IRA for over two and one-half years, the facts alleged in the pleadings support the inference that [the beneficiary] likely was damaged from the delay in distributing those funds,” the Appeals Court held. Accordingly, the Court held that the beneficiary properly pleaded her breach of contract claims.
Additionally, the Court held that the beneficiary also properly pleaded claims for breach of fiduciary duty, holding that a fiduciary relationship existed between the decedent and UBS. “As a fiduciary, UBS was obligated to administer the IRAs for the exclusive benefit of [the beneficiary] (assuming the truth of [her] allegation that she was the only proper beneficiary) while acting fairly and in her best interests,” the Court stated, holding that UBS was required to timely distribute the IRA proceeds to the beneficiary and to keep her otherwise informed of their status.
The Appeals Court then held that the beneficiary’s claims for infliction of emotional distress were not sufficient and should be dismissed. On the issue of violation of the Massachusetts consumer protection statutes, however, the Court again held for the beneficiary. “Based on the pleadings here, UBS … (1) denied Aliberti the funds to which she was entitled; (2) for multiple years; (3) without good reason; (4) until she was forced to take legal action and incur unnecessary costs and fees,” the Court noted, holding that those actions constituted a violation of Massachusetts General Laws chapter 93A.
If you have questions or concerns about issues involving family law, domestic relations, or other legal issues, you should contact a competent attorney. Our divorce, family, and domestic relations attorneys may be able to work on your behalf to handle your case. We have offices in Andover, Newburyport, Newton, and Boston. Contact us by phone at 978-225-9030 during business hours to schedule a free consultation.