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Lawsuit alleges Wells Fargo error involving incorrect birthdate caused $130K in penalties

On Behalf of | Jan 11, 2024 | Firm News

A lawsuit has been filed against Wells Fargo alleging that an error in entering data when setting up an account led to $130,000 in tax penalties, according to InvestmentNews.

The plaintiffs are the beneficiaries of a family trust who filed suit last month in U.S. District Court in Louisiana.  According to the complaint, Blake Kymen of Wells Fargo Advisors helped a client establish a beneficiary for an individual retirement account in 1997.  The beneficiary was a trust in the name of the client’s wife, Jacquueline Lowe, who was 58 years old at the time.

The lawsuit states that Kymen apparently forgot to enter Lowe’s birth date in the client’s electronic file, resulting in her birth date reading Jan. 1, 2001 instead of her actual birth date of Oct. 31, 1939.  The error went undetected for about two decades, until another advisor noticed that the annual required minimum distributions from the fund had been too low.  While nearly $843,000 should have been distributed, the trust had only distributed about $570,000.

When the matter came to the attention of the Internal Revenue Service, the IRS levied penalties of over $130,000 because the required minimum distributions had not been met.  When a lump sum distribution was issued to correct the shortfall, Lowe’s income tax rate was raised to the next bracket, the complaint said.  She also incurred legal fees and had her Social Security benefits reduced.

The suit filed by Lowe and one of her successor beneficiaries against Wells Fargo alleges negligence and a breach of fiduciary duty. The plaintiffs seek recovery of compensatory damages, attorneys’ fees and costs.  Wells Fargo declined comment on the lawsuit.

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