We recently received a notice from the state of Kentucky, Cabinet for Health and Family Services, that they had been appointed as guardian for one of our customers. It was a typical request to review the account, send statement, remit funds over $500, close debit cards, etc. However, unlike most accounts that receive this letter, this account had CDs and IRAs. There was a dispute in our customer service area about how to proceed. One side believes that the IRA and CD accounts are "savings" accounts and should be included and remitted. The opposing side believes these accounts should not be included. What is the normal procedure for these types of accounts? Below is the wording from the state:


"We are requesting information on all financial activity conducted at your institution by this client, to include checking/saving accounts, loans, CDs, safe deposit box, etc. Please complete the following requests:

[list]
[*]Send a copy of the bank statements for the past 6 months on all existing accounts
[*]Send all funds over $500 from checking/savings accounts to the address below [*]Freeze the account with the exception of direct deposits of income and any automatic drafts, deactivate debit cards if necessary"

So, should the CDs/IRAs in excess of $500 be closed and remitted with the checking and traditional savings accounts? Thanks!

I don't know the answer to this question, but maybe you should contact the state to clarify what they want and then review with your local counsel. Cashing out IRAs have tax consequences and I would think you would want some type of protection from the customer and/or the state prior to creating a taxable event.

Thanks IrishGuy. Happy St. Paddy's Day to you! We are in the process of contacting the state, but are having little success in getting a call back. Just curious if anyone else had encountered this. Thanks again!

Have you tried asking someone at KBA for advice? They may be able to help.

The state needs to be told that there is an IRA and the amount involved before you remit the funds. I would gratuitously point out that any distribution to them will be reported in the name and SSN of the participant and will, thus, be taxable participant. (I would document that conversation.)

If the individual has no other income and the IRA is small, the individual may have no income tax liability on what would otherwise be a taxable distribution.