Elderly people in Massachusetts with high-value estates should be on the lookout for friends and family that might be willing to steal money from them before or after they die. Although this may seem like a rare occurrence, a similar situation happened involving a 13-year-old girl and her father who passed away in 2008. Luckily, a court-appointed conservatorship may have saved her from losing any money at all.

When the father of the teenager passed away on Sept. 3, 2008, his employer-sponsored retirement plan and all of its assets were to be transferred to an inherited IRA. Instead of this, the mother of the teenager, who was no longer married to the father, opted for a lump-sum distribution. This lump sum was taxed by the Internal Revenue Service and a portion of it was misappropriated by the mother of the 13-year-old.

A conservatorship was eventually created for the estate of the child. Her conservator filed a suit against the distribution and the girl's mother because she allegedly used some of the money intended for her daughter to benefit herself. A state court sided with the suit on behalf of the girl and required the woman to reimburse her daughter within 120 days. After the time had expired and the mother had only repaid some of the stolen money, she was ordered to return the rest through a monthly plan.

After the court's decision, a private-letter ruling request was made to the IRS in the hopes that the taxes paid on the lump sum would be returned.

The IRS made its ruling on the incident recently. The federal agency allowed the teenager to undo the distribution made in 2008, allowing her to place the funds into an inherited IRA with the previously-paid taxes in tow. In order to avoid such an ordeal, elderly individuals should consider creating a conservatorship for themselves.

Source: Investment News, "When a mom raids her child's IRA," Ed Slott, Dec. 11, 2011