Overseer of account spends insurance/pension of deceased father of child-now adult & denies access to funds?

Friend's mother has spent over 200,000 in life insurance, and still uses monthly pension payments for her own "spending money" (she is not in financial need). The entire estate of the now deceased father was left to my friend, but the mother was the custodian of the accounts, so she blew it all when the life insurance was dispersed, and continually denies my friend access to the money. I know the deceased father is rolling over in his grave seeing this happen, in addition to the fact that my friend is being summoned by the irs because the mother didn't pay taxes on the life insurance! I'm not sure about any of you, but at 12 years old, I didn't know what my tax obligations were, especially when I didn't even know I had the money. 8 years later, it's time he did something about it, and any legal/experience-related advice would really help. Thanks.

Correction, yes, there is no interest on life insurance, all of the interest and penalties resulted from a police retirement fund set up by his father. In the process of seeking legal representation, as he learned he has pretty much no control of it until he is 21 (20 now). Thanks for all of the help.

If the money was left in your friend's name, then your friend's mother has acted irresponsibly, but legal action may be limited.

However, if the money was left in a trust with your friend's mother as trustee, some form of the Uniform Prudent Investor Act has probably been adopted in your state. The legal protection given to beneficiaries of trusts is very strong when the trustee abuses his or her duties. That's why we say, 'don't leave money to a minor, leave it to a trust that a lawyer creates for you.'

Either way, your friend might want to contact a few attorneys (who might work for a portion of the settlement). It doesn't sound like there is a nicer way to resolve this. If the facts are as you have presented them, it sounds like your friend's mother feels entitled to money that is not hers.

Short of suing his mother, there probably isn't much that can be done to recover the funds. If she was the administrator and used the funds to maintain his livelyhood, that is probably going to be legal.

He isn't hearing from the IRS due to life insurance proceeds regardless of what he is telling you. Life insurance is paid out tax free!

All he can do is take her to court. Also, someone who handled the estate must not have done their job somewhere else, because life insurance is not taxed. There is something else going on outside of that money. It could be the pension or some retirement account that was not properly maintained by the mother. On those, for non-spouses, there are distribution requirements that if not taken care of brings heavy tax penalties.

OK, well, mom doesn't HAVE to pay taxes on life insurance. It's not taxable income. So I have NO idea what the IRS is REALLY after, but it's NOT taxes on life insurance benefits.

Friend can hire a lawyer, go to court, and request both an accounting of funds, and a change in the trustee. LIkely, there's a provision that "Friend" can't get ahold of the money before they're 25 or 30, so THEY don't blow through it, also.

But if the money is gone, what are you saying, that you want to revoke their PENSION? Any money left to them, has been left to them. Period. Someone cannot direct what someone is supposed to do with funds, unless those funds are in a TRUST, and that person is TRUSTEE.

So, if there's no trust, she was free to do whatever she wanted with the money. Period.

Consult a lawyer. You'll find there ARE no tax oblitgations from life insurance procedes to a named beneficiary. And that a court will have to change a trustee, and if she's not a trustee, the money is HERS.