Wrong birthday info led to $130K in RMD penalties, plaintiffs say

The beneficiaries of a family trust have sued Wells Fargo over a clerical error made more than 20 years ago that they say has since cost them more than $130,000 in penalties from the IRS.

In 2001, an advisor to the trust established by George Lowe allegedly entered an incorrect birthdate of Jan. 1, 2001, for one of the beneficiaries, who was born in 1939. The error went undetected for years, until a different advisor for the trust told the family that the levels of prior required minimum distributions seemed low.

And indeed they were, according to the lawsuit filed Dec. 21 in U.S. District Court in Louisiana. As of 2021, the trust had distributed about $570,000, though nearly $843,000 should have been distributed, which led to the considerable IRS penalty. Lowe died in 2011, and there are several family member beneficiaries named in the trust.

The former Wells Fargo advisor who worked with the trust, Blake Kymen, died in 2018. Another former Wells Fargo advisor who took over the account afterward, Oscar Hernandez, moved to Morgan Stanley, and the trust client went with him. Neither Kymen's estate nor Hernandez are named as defendants in the suit.

The error was discovered in late 2022, according to the complaint.

As a result, one of the beneficiaries, Jacqueline Lowe, incurred legal fees, was bumped into a higher tax bracket because of higher lump sums distributed recently, and has had her Social Security benefits reduced, the lawsuit states. The plaintiffs allege negligence and breach of fiduciary duty.

News of the lawsuit was reported earlier this week by industry publication Financial Advisor IQ.

Wells Fargo declined to comment about the case.