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| William Delaney, EA Westwood MA |
Five years later (Nov. 2013) Kenney decided to change the beneficiary on two of the three IRAs and completed an UBS update form for each, “writing in the names of four individuals with the notation ‘25%’ next to each…Kenney completed each of the forms improperly…” and they were rejected by UBS.
The financial advisor thereupon arranged for new beneficiary forms to be sent to Kenney, who apparently did not complete and resubmit them prior to his unexpected death on Dec. 2, 2013.
“Approximately two weeks following Patrick Kenney’s death, Aliberti contacted Margaret Kenney (financial advisor/former sister-in-law) about the three IRAs.” The two which were in flux at death contained relatively small amounts. The third, which had been left intact as to beneficiary, was valued at approx. $276,000.
Margaret (former sister-in-law) Kenney’s initial reaction was to send a series of trash talk e-mails to Aliberti; finally she did send a message which stated “Documents mailed to you today please sign and return ASAP for distribution.”
Now, to an event which threw a monkey wrench into the distribution process. One of the four who were named as updated beneficiaries on the forms which UBS had rejected, Craig Gillespie (a friend of the late Patrick Kenney), contacted UBS in writing (attorney letter) asserting that Kenney had changed the beneficiaries on the two small IRAs and was in the process of changing the beneficiary on the large IRA at the time of his death. “The letter also stated that Gillespie intended ‘to have a court of law resolve the issue of whether or not he is a named beneficiary of the third IRA account’ and asked UBS not to make any distributions therefrom.” Apparently, Gillespie thought that his 25% beneficial interest in the smaller IRAs could not be disputed. UBS put a hold on the large IRA.
Aliberti contacted UBS in Jan. 2014 and filed a verbal claim to all three accounts. UBS acknowledged the claim by sending an unsigned letter received on Feb. 4, 2014. On Feb. 19, 2014, Aliberti “sent completed beneficiary processing forms for all three IRAs, a copy of Patrick Kenney’s death certificate, and a copy of her driver’s license to UBS.”
Responding to complaints from Aliberti regarding the trask talk e-mails, UBS “removed Margaret Kenney from oversight of all three IRAs, and Aliberti received another form letter from UBS stating that the IRAs had been updated for Management access only…”
Subsequently, UBS liquidated the two small IRAs and made distributions based on the previously rejected update forms. Aliberti, being a 25% (not 100%) beneficiary under the updated listing, received her smaller equal distributions.
Aliberti contacted an attorney, who requested information from UBS regarding the two IRA accounts and “details of any dispute as to Aliberti’s beneficial interest in one or more of the IRAs.” “Although Aliberti’s request expressly proposed delivery of materials within seven days, UBS failed to respond. Aliberti ultimately resorted to service of a keeper of the records deposition subpoena on UBS.” The record is silent as to what happened regarding the subpoena.
We do know, however, what Aliberti then did. Her attorney sent to UBS a Mass. General Law, Chapter 93A demand letter on May 18, 2015. Keep in mind that Patrick Kenney had died on December 2, 2013 (note 1). The letter alleged that “UBS knowingly and willfully failed to provide Aliberti with information to which she was entitled as the beneficiary of an account or accounts held by UBS; serially ignored Aliberti’s attempts to communicate…; compelled Aliberti to obtain counsel and issue a subpoena in order to obtain that information; UBS distributed proceeds of the smaller IRAs without first addressing Aliberti’s stated belief that she was rightfully the sole designated beneficiary thereof; and UBS refused to distribute the substantial proceeds if the larger URA to her without lawful excuse or basis.”
On June 15, 2015 UBS responded to the demand letter and denied the legal merit of the asserted claims. On Aug. 4, 2015, UBS filed a complaint for interpleader (note 2)
which asked the Superior Court to determine who owned the large IRA and asking that Aliberti and Gillespie be joined as defendants. Eventually, Gillespie waived his claim to the larger IRA. However, UBS continued to hold the distribution.
On June 9, 2016, UBS and Aliberti agreed that UBS would distribute the large IRA to Aliberti, “promptly and without delay…”. She retained her right to pursue other claims against UBS. The distribution occurred on July 1, 2016, approx. 2 ½ years after Kenney’s death.
The Massachusetts Superior Court agreed with Aliberti that her Chapter 93A claim was “well pleaded.” The Supreme Judicial Court took the decision under review. In its review, the Supreme Judicial Court also addressed whether or not a fiduciary relationship existed between UBS (custodian of the accounts) and Aliberti (beneficiary of the accounts). The Court concluded that this IRA relationship “is not among those traditional…relationships giving rise to fiduciary duties as a matter of law.”
Next, the Court looked to the argument that an IRA is a trust under the Internal Revenue Code. While concluding that IRC Sec. 408(h) does define an IRA as a trust, the Court also noted that “the definition is constrained to uses for purposes of this Section,” in other words for income tax purposes.
Last, the Court addressed the Sec. 93A claim. There must be a trade or business relationship between the parties when the alleged unfair or deceptive activity occurred for Sec. 93A to apply. Looking at the record, the Court concluded that UBS provided a “bundle of contracted-for services…as IRA custodian in exchange for periodic fees.” This established the necessary “business context within the meaning of c. 93A.”
There must also be a finding of unfair or deceptive practices (not defined in Chapter 93A). Case law sums it up. This case cites several sources which address the same principle---it is a facts and circumstances determination. It was clear to the Court that UBS had “denied Aliberti the funds to which she was entitled; for multiple years; without good reason; until she was forced to take legal action and incur unnecessary costs and fees.” And, for good measure, the Court also commented “To this litany may be added UBS employee Margaret Kenney’s admitted dispatch of abusive text messages…UBS’s alleged failure to supervise the IRAs’ administration …and UBS’s decision to file an allegedly unjustified interpleader complaint (see note 2) following more than one and one-half years of delay (by UBS).”
So, if your client is experiencing a rough time when dealing with an IRA custodian, it may be a good idea to threated the use of a real or potential Ch. 93A letter in order to light a fire under the custodian. See MGL, Ch. 93A, Sec. 9(3). Finally, if you are looking for an outstanding source of information regarding retirement benefits and IRAs, the book written by Natalie B. Choate (see Note 1) is highly recommended by your Editor.
Note 1 – “When an IRA owner dies, ownership of the account passes immediately and automatically to the beneficiary, by operation of the contract.” Natalie B. Choate, Esq., Life and Death Planning for Retirement Benefits (8th Edition 2019), page. 259 and as referenced in the case, page 7.
Note 2 – MA Rule 22 allows a party plaintiff (USB in this instance) to ask that the defendants (Aliberti and Gillespie) be joined to avoid multiple claims and double jeopardy against the plaintiff.
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