In 2006, the Employee Benefits Security Administration rolled out a program that outlined how financial institutions can terminate plans and distribute benefits abandoned by sponsoring employers. During fiscal years 2006 through 2010, the EBSA says there were 685 applications under that plan, and that nearly half-331 applications-came in fiscal 2010.

Commenters on its 2006 rules had suggested that record keepers, third-party contract administrators, accountants and plan service providers would be in a better position than financial institutions to handle the job. Reason: their ready access to plan documents and records. However, an EBSA spokesman says the amendment is primarily to address certain issues related to bankruptcy trustees who step into the shoes of the plan administrator when they handle a Chapter 7 bankruptcy.

So what should you do to avert abandonment of your client's 401(k)? Sedhom says advisors should tell clients to be proactive with their account, review all statements and ask questions of the plan sponsor if they suspect there is a problem. If a client leaves an employer, it's typically best to transfer the 401(k) to the new company plan or into an IRA, she says.

Do you have a client who can't find 401(k) plan assets from a prior job? Search the EBSA's database for companies and qualified termination administrators at www.askebsa.dol.gov/abandonedplansearch/, or call 1-866-444-3272 (EBSA).
-- Gail Liberman


Advisors Spending More Time On Problems With Trusts
Financial advisors say they are spending more time ironing out snafus in legal documents needed to transfer assets to their numerous baby boomer clients who are due inheritances from their deceased parents' estates.

Consumeraffairs.com cites cases in which estates and custodial accounts have been tied up and can't be liquidated because of administrative errors and problems with paperwork. One financial advisor's client, who asked not to be identified, told Financial Advisor that he was racking up thousands of dollars in legal fees trying to get a brokerage firm to unfreeze assets of a trust and recognize a legal document appointing him as trustee.

"Whenever you're dealing with custodians on the trust side, everything goes through legal, so it creates a whole other barrier," says John Catalfamo, a registered investment advisor in Palm Beach Gardens, Fla. He says he's been spending more time on these kinds of issues.

After a review by a brokerage's legal department, trust documents are apt to go to the firm's operations department, which then provides an advisor with a list of which documents are missing or need to be fixed.

Even something seemingly simple could potentially create slowdowns in having assets released from a trust. For example, Catalfamo says, he once noticed that an attorney had misspelled a client's name as "Jon," when it should have been "John," on a living trust document. Fortunately, Catalfamo caught the error and was able to help the client correct the document.
While it may be tough for a financial advisor to resolve a legal issue in a different state, it's routine for a lawyer to handle, says Juan C. Antunez, a Miami trust and estates attorney. "In this [legal] practice area, that's a nothing phone call."

What makes matters particularly complicated when mistakes are uncovered is that changes may need to be made at many levels. Each state has laws affecting trusts, and every bank, brokerage and investment company has its own policies.
When the trust grantor dies, the problems of correcting mistakes or omissions get compounded. To nip this issue in the bud, many trust companies are wooing financial advisors to have their clients hire them as successor trustees. This way, their experienced professionals can review documents and help eliminate administrative problems while trust grantors are alive.

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