Don’t Forget to Label Your Beneficiary Designation Forms with the Correct Account Number: A Cautionary Tale

Quick v. Morgan Stanley, Docket No. A-0443-21 (N.J. Super. App. Div. Jun. 29, 2023)

This matter arises from a dispute over the rightful beneficiaries of a Roth IRA held by the decedent.  Frederick Quick (“Decedent”) died leaving, in relevant part, a Roth IRA with Morgan Stanley.  The Decedent was predeceased by his spouse (“Marie”) and their only child, Mark.  The Decedent’s surviving family members disputed who was entitled to this IRA.  Plaintiffs consisted of the Decedent’s two children from his first marriage and Marie’s child from a prior relationship.  Defendants consisted of the Decedent’s five grandchildren.

Plaintiffs alleged that the Decedent changed the beneficiary designation form of the IRA in 2017 to name them as the designated beneficiaries.  Defendants argued that the Decedent did not intend to change a 2015 beneficiary designation and, even if he did, he did not successfully complete Morgan Stanley’s change of beneficiary form.

In 2015, the Decedent completed a beneficiary designation form for the IRA, naming plaintiffs as primary beneficiaries of the IRA.  The Decedent had a client services associate, Jane Osipova (“Osipova”), with whom he worked consistently regarding his accounts.

Marie — again, the Decedent’s predeceased spouse — died in 2017.  Thereafter, Osipova, incorrectly assuming that Marie was the beneficiary of the Decedent’s IRA, forwarded change of beneficiary forms for the Roth IRA to the Decedent, as well as another Morgan Stanley IRA of the Decedent.  Audrey Getsy (“Getsy”), a long-time business assistant of the Decedent, completed the forms and named plaintiffs as the designated beneficiaries.  Getsy did not clearly label which forms were for which accounts, which created confusion.

Osipova called the Decedent to clarify who the intended beneficiaries were of the Roth IRA.  Osipova could not recall the substance of this conversation based on her own recollection and relied on her notes saved in Morgan Stanley’s internal annotation system.  Osipova’s notes indicated that the Decedent stated the 2017 beneficiary designation form was sent in error because Marie was never listed as the designated beneficiary of the IRA.  The 2017 beneficiary designation form was thereafter marked as “rejected” in Morgan Stanley’s system.

In 2018, Getsy forwarded another IRA beneficiary designation form to Morgan Stanley without clearly labelling which of the Decedent’s IRAs it was for.  The 2018 form was identical to the rejected 2017 form in naming plaintiffs as the designated beneficiaries.  Osipova called the Decedent, who confirmed the beneficiary designation form was not for the Roth IRA at issue in this lawsuit.  This 2018 beneficiary designation was accepted by Morgan Stanley.

The Decedent died on April 1, 2019.  Morgan Stanley produced the 2015 beneficiary designation form for the Roth IRA and the 2018 form for the other IRA.  Plaintiffs contested the validity of the 2015 form after Getsy located a copy of the 2017 form in her files.

The trial court granted a motion for summary judgment in favor of defendants.

The Appellate Division affirmed the trial court’s ruling and rejected plaintiffs’ claims that Osipova’s notes were impermissible hearsay and her testimony unreliable because she could not specifically recall the conversations with the Decedent.  The Appellate Division found that the notes fell under the business records hearsay exception of N.J.R.E. 803(c)(6) since they were required to be taken by customer service associates in the ordinary course of business.  Additionally, the court was unpersuaded that Osipova’s reliance on these notes made her testimony unreliable because she had nothing to gain from misrepresenting those conversations.

The Appellate Division rejected plaintiffs’ argument that the trial court should have considered the Decedent’s probable intent upon inspecting the purported 2017 beneficiary designation form and the Decedent’s choice to name plaintiffs as the beneficiaries of the Decedent’s other IRA by virtue of his 2018 beneficiary designation form as to that account.  Further, plaintiffs did not cite any controlling authority to support this proposition.

The Appellate Division was unpersuaded that the Decedent substantially complied with Morgan Stanley’s beneficiary designation change of beneficiary form.  To the contrary, the court determined that the record did not demonstrate steps were taken to comply with New Jersey law to effectuate the change of beneficiary designation, especially when considering the Decedent’s communications with Osipova.  No effort was made to ensure that the 2017 beneficiary designation form complied with Morgan Stanley’s procedures or that it should have been accepted as the superseding form.