Legal Question in Wills and Trusts in Virginia

Inherited IRA

December 2003 I inherited 25% of an IRA account. I submitted the paperwork and Vangard sent me 4 checks (based on 4 open accounts from the deceased). In May 2004, I received a phone call from Vangard saying they made a mistake and I must return over $5,000 to them to be redistributed to someone else. I have not paid because they have not provided proof of their claim. I also took a large tax hit last year due to this inheritance. When I mentioned this to them, they told me to see my tax accountant and refile my taxes. They recently sent me cortespondence which repeated what they told me about returning the inheritance and refiling my taxes, but they have again given me no proof of their claim. Am I legally responsible to return these funds (with or without proof)? I did not make a claim for any specific amount or percentage. Vangard told me what I would receive after I was notified of the inheritance. What they sent matched what they told me. Also, if I have to return the funds, do I have any rights to claim damages or the cost of refiling my taxes? This will be a financial burdon since the checks did not arrive with a disclaimer ''do not cash until we check for mistakes'' I cashed them and used the money on home repairs.

Asked on 9/15/04, 9:50 am

1 Answer from Attorneys

Jonathon Moseley Jonathon A. Moseley

Re: Inherited IRA

This question is hard to answer because we do not know WHY they are asking for the money back.

Generally speaking, you do NOT have any responsibility to honor the request of Vangard. They are a private company, not a government agency. However, could they go into court and get a "judgement" or order obligating you to return the money? I have no idea because we don't know WHY they think they made a mistake or why they think someone else should get the money now. Could they theoretically get a court order? Perhaps. But at least then they would have to prove to you WHY, not just make a naked statement. I am assuming that you do not have any contract with Vangard regarding this particular IRA and did not sign any contract. Therefore, you would NOT be responsible for any attorney's fees or other costs if the matter went to court.

Therefore, I would recommend that you do NOT return the money, at least not without proof. I DO think you should send a letter saying that you cannot comply with a random request from a private firm without any evidence as to why, and only if they hold you harmless as to all expenses and costs you incurred. Say in writing that you want proof.

If Vangard made a mistake, it is possible that Vangard is responsible for its mistake to any other person regardless of whether you return the money or not. It may be treated legally as a gift. In any event, I would certainly want to see hard evidence as to what the h--ll is going on before returning this money.

Also, I am concerned about your statement that you took a tax hit. You should not have paid any taxes when inheriting property. This should have been a tax-neutral event. I do not know why you paid any taxes at all when inheriting property. I think you should review this carefully and file an amended tax return to get a refund (which you CAN do) if your earlier tax return was unsuccessful.

Can Vangard be made legally responsible for your taxes and any other costs to you? Yes, I think so, but this might require some careful thought. At a minimum, you should demand that Vangard compensate you for these costs. If you return the money, you should return it LESS any costs or expenses to you.

If I can help you legally, give me a call. My rates are very reasonable.

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Answered on 9/17/04, 8:56 pm

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