Stuck in Merrill Lynch beneficiary hell

The Thinker by Rodin

It sure is nice to inherit some money. Good luck in collecting it, at least at Merrill Lynch.

My father passed away in February 1. Some weeks afterward our stepmother told us we were beneficiaries to some of his accounts. It turned out to be a fair amount of money, considering there are eight of us, roughly $80,000 each. My sister spent a few weeks on the phone with M/L going in circles. Frustrated, she asked me to be the family’s liaison. She still has a job. I am retired.

Sure. Whatever. I’m used to playing the good brother role and I did have the time. And boy it sure takes time if you mean going around in pointless circles. They are clearly loath to let go of Dad’s accounts. In fact, it’s hard to imagine how they could make it any harder to claim money that is rightfully ours.

Over more than thirty years my father had a relationship with “Lee” at M/L, who apparently owns a brokerage under the M/L umbrella. Over the decades a lot of things have happened in this industry. For M/L, already a huge and impersonal company, it meant being acquired by the world’s largest and most uncaring bank: Bank of America. This is something I learned later on. Had I known, I would have taken it as an omen of what was to come.

It sounded pretty straightforward. Dad had about 28% of the funds he wanted to bequeath us in a simple account, a “Cash Management Account” to use the M/L term. The rest were in Roth accounts, which were tax advantaged. So you would think it would be pretty simple: sell any mutual funds in these accounts, divide the totals by eight and cut each of us a check for that amount.

Ha ha! Of course not! The first set of excuses I got when I made my initial queries was, “It’s tax season, we’ll talk to you after April 15.” They were so busy in the M/L office that they can’t be bothered to help us with this, at least not while they have clients that want to give them money rather than take it away. To say the least Molly, the lady I spoke with, was curt. Feeling a bit ticked off a few days later I dialed Lee.

Lee was all sunshine and light, expressed condolences and said this wasn’t that big of a deal. He’d have Molly send me the forms we needed. One ripple was that since the Roth funds were tax advantaged, we might want to set up inherited Roth IRA accounts. Or we could take the money as cash. In any event it’s an inheritance. No taxes to worry about.

So many of us dutifully decided to set up inherited Roth IRAs, a puzzling process to learn about and hard to set up as you need a death certificate. As for that Cash Management Account of Dad’s, my sister sent me the forms she had. They required notarization. It took some time since there are eight of us but we all found notaries. They sent the forms to me. I double checked them and mailed them in as a batch. Given their importance I sent them certified mail so they couldn’t claim they got lost in the mailroom.

A couple of weeks later after hearing nothing I inquired about them. Molly looked at the forms and said, oh, these aren’t the right ones! I pointed her to emails we had gotten saying they were the right ones. Oh, but that’s a Merrill Edge form (a subsidiary of BankAmerica.) They don’t accept that form because they are Merrill Lynch, not Merrill Edge. Somehow I managed to not raise my voice because it was no small matter of time and expense by eight of us to get all these forms signed, notarized and sent in. Okay, I said, what form do we send in then?

Well, there is no form, Molly replied. You write a letter listing the shares you are entitled to, get it notarized and send it in. Do you have a sample? Oh no, we don’t do that. You have to do it. How do we know it will be correct when we send it in? Well, underwriting will tell us if it’s okay. Oh boy, eight of us, all doing individual letters, with numerous back and forth letters, no guidance, until maybe we crank out one they would accept. And no one will get anything until all eight of us do it correctly. So this isn’t going to work. Well, it’s how we do things. After another chat with Lee he agreed as a “special exception” to give us a sample letter with an attached spreadsheet that listed shares and cash we were each entitled to. I guess they expect their clients to hire CPAs to do these things.

Some weeks passed during which Molly went on vacation. Eventually after dodging calls for a few days I got her on the phone. I learned they could not cash out the funds in the Cash Management Account. My father had requested an “equal division”. In their minds it meant we all had to get proportional shares of the mutual funds in the account. They couldn’t just mail us a check. We needed each to have a broker that would take these funds.

After much back and forth I learned that dividing these shares by eight of us meant there were fractional shares left over. Fractional shares could not be passed to us and would have to be sold. We all had to get whole shares. I figured they would want us to send notarized letters saying it was okay to do sell these fractional shares. Surprisingly they let me as my family’s spokesman authorize it. Of course, they could have volunteered this information weeks earlier, but did not. You have to persistently dig for it and if you ask the right question they will give you the right answer. They won’t volunteer anything. God forbid they give you a document that explains the whole process with a simple checklist to follow.

They suggested we all set up Merrill Edge Cash Management Accounts to make it easier to get the money. Of course this also has the advantage of keeping the money inside the Bank of America Empire. So I tasked my siblings to set these up. By this time of course they were spitting nails. The last thing they wanted was some sort of Merrill anything account. But it looked like it could save months or years of runaround, so I requested they each set one up anyhow. They had a contact in their office that was sometimes available who could set these up. Some siblings gave up in frustration when calls to this lady were not returned and called their local office or set one up online.

Molly said that their system wouldn’t show them our Merrill Edge account numbers unless their office set them up. I assumed she was going to complete the draft letters and put in the exact numbers of shares and our account numbers. When I asked, she said I was supposed to do it. Naturally this was news to me. I now have all these forms done and will mail them out to my siblings, who must get this second set notarized. Except only the letter must be notarized. The attached spreadsheet just has to be signed and dated.

I’m betting that when these all arrive at M/L they’ll find a reason to kick them back and we’ll have to start all over.

Then there are my Dad’s two Roth funds. Here to speed things up we were encouraged to cash them all in. My siblings were fine with this. I had researched the funds in these accounts and they were underperforming funds. Granted my father was chasing stability instead of market trends, but of the five funds I looked at three were real laggards compared with the S&P 500 index and all came with more than 1% annual management fees. Jeebus! Well, at least if we cashed them in we could hardly do worse than how they managed these funds!

But they wouldn’t sell the Roth funds until each of us called them personally and okayed it. That took some time. To “speed up” the process I was told to send drafts of the Roth withdrawal forms I got from my siblings so they could flag errors. I sent them electronically on May 20. There they sit, still waiting to be reviewed. Molly says their staff of four is down to 2 and she is so busy but she hopes to do it next week. Doubtless they will find errors that will have to be tediously corrected. But if I get them all corrected then I can send in this batch of forms and in theory there should be no issues so they can disburse the funds. I’m fully expecting I’ll send them in and they’ll find a reason to kick them back, something they haven’t explained before. We’ll see but it depends on poor overworked Molly actually deigning to review our forms.

In short, it’s a messed up and confusing process. In fact, it’s not a process at all. It seems they make it up as they go along. It seems likely that they are paid based on the assets in their accounts and they don’t want to lose them. Only with persistence, firmness and summoning your inner Donald Trump can you collect and I suspect we are nowhere close to getting our shares. They won’t volunteer anything. Meanwhile siblings who could use the money so it can grow for their retirement can’t get it. Not that M/L cares at all.

I have no idea if this sort of hassle is typical in the industry, but I can say to avoid M/L at all costs. If you have beneficiaries for accounts, ask to see their process for distributing funds and make it known to the beneficiaries. Make sure the process is straightforward. My Dad didn’t do this. The inheritance was a complete surprise. But being a beneficiary doesn’t mean much if you can’t actually get the money.

I am expecting before this is over we’ll be filing a lawsuit. It will probably go into the bottom of a long queue of similar lawsuits all from angry people like me simply trying to collect money intended for them.

Getting solar panels for your house is (usually) a no-brainer

The Thinker by Rodin

I recently wrote about my father’s death in February and my thoughts on what to do with his inheritance. On the latter, I opined I might just give it away. It didn’t seem like something I needed to worry about, as we saw a copy of his will. It left everything to my stepmother, provided she did not die within thirty days of his death. In that event we were to get five percent of the estate. My stepmother’s will was similar so providing she didn’t change it, it looked like it would be some time before we would receive any portion of the inheritance, if any at all.

So I filed away what to do with the money as an academic exercise. A couple of weeks after my father passed away I got a call from my sister. “We have a problem,” she said. Dad had made me and each of my siblings (there are eight of us) beneficiaries to the money in his Merrill-Lynch accounts. This consisted of a money market account and two Roth IRAs. And this trumped anything in his will.

The problem was: do we take the money and run? Or do we honor what appeared to be the intent of his will and give our share to our stepmother? Regardless we each would get an eighth of the amount, and it was a considerable sum. We’d all have to voluntarily agree to give our share to our stepmother. After much discussion we figured that this was likely not an oversight; our father probably intended us to get this money, possibly to respect our late mother’s wishes for his estate. There was still something like half a million dollars in other assets that our stepmother could draw on. It was strange though that Dad did not communicate these details with us before he died.

So now we are assembling forms to try to claim our share of these accounts. As you might expect it’s a hassle. All inheritances are tax-free. Dear old dad had at some point paid a bunch of taxes to put much of his money into Roth IRAs, which made his withdrawals tax-free. If we moved our share of these funds into our own inherited Roth IRAs, we could let these funds accumulate tax-free. It’s almost like having a tax shelter but not having to go to the Cayman Islands!

Thus my hypothetical thoughts on basically giving the money away now turned more concrete. First of all, the amount of money was more than I expected. My dad turned out to be a good investor, which meant that he found a financial adviser he trusted and he turned it into a pile of cash. (Much of the startup money came from his parents.) Second, it made me think of what I might actually want to spend the money on. It turned out that only two things mattered and there would still be money left over to give a lot away.

First, I wanted us to be debt free again. We would get there in a year or two but with a windfall it seemed like a sensible way to spend Dad’s money. There is about $18K on the new mortgage. We actually were debt free for a few months after we sold our last house and waited for the new one to be constructed. It was surreal. I wanted that feeling again.

Second, I wanted to reduce our carbon footprint even more. Basically, I wanted solar panels. Our house is new and super tight, so it’s energy footprint is already minimal. We already pay extra to get our electricity through renewable wind power. But if we went solar we would probably pay nothing for electricity, once we paid for the cost of getting a solar system installed. Besides, about a third of the houses in our subdivision have them already so we are feeling the social pressure to go green.

So I started dialing around. It was strange that our condo association cares about your doorknockers but not solar panels. No permission was needed. If you have the money, solar tax credits make going solar a no-brainer. Uncle Sam will give you a 30% tax credit and the state of Massachusetts (where we live) will give a $1000 tax credit. Moreover there are the SRECs (Solar Renewable Energy Certificates). Basically the power company will give us money for our solar system because they must show that they are getting an increasing amount of their power from renewable energy. The credits expire after ten years, but the first year we will earn $1635 from our SRECs, which will taper down to $545 by the tenth year. (SRECs are not available in all states. See if you qualify.)

The estimates were all pretty close pricewise. We ended up signing with Direct Energy Solar mainly because they seemed the best capitalized. It turns out that we don’t need to cover the entire southern facing side of our house with solar panels. Based on our usage we need them just over our garage, twenty altogether. It’s actually counterproductive to generate more solar energy than you use because you end up with a credit you never can fully spend.

Not every house is ideal for solar panels. Lower latitudes certainly help. You need a roof that faces south and if there are trees in your way it probably won’t make financial sense. You don’t necessarily have to buy a system to go green, like we are doing. There are companies that will let you lease solar panels they put on your roof. You still pay for electricity, but usually at about five cents a kilowatt-hour less than what you would otherwise pay. If you run the numbers it makes a lot of sense to own your own panels. You can in theory take them with you to your next house if you want. We figure that our system will pay for itself in about five years. And we’ll get a cool app that will show us in real time how much electricity we are generating. Direct Energy Solar will even guarantee that we will generate the energy we need and will pay us in the unlikely situation that we don’t.

Going solar is really a no-brainer and probably worth taking out a home equity loan to finance it if necessary. You will get tax credits if you buy your system, earn income from SRECs that you will sell (if your state allows it), reduce carbon pollution and minimize your carbon footprint. Since these systems tend to cost $20-$30K to install, the only question is why builders don’t offer solar panels as an option for every house where it is appropriate.

The only downside I can find to solar is that you can’t get it quickly. A whole lot of coordination has to happen between various parties. We expect to have ours installed and turned on in 90-120 days. There is likely much that could be done to hurry up this process but the power companies don’t make it a priority and worry about whether all this “net metering” will stress out their power grid. They would like to charge solar customers for costs to maintain the grid. There is a bill to this effect in front of the Massachusetts legislature at the moment.

I’ll let you know how it goes in future posts.