The situation is that a friend was terminally ill and was struggling financially and so took a hardship withdrawal. His health took a turn for the worse and died before he received the check.
Now his wife told the bank he died and requested the withdrawal be reversed. Initially the bank said they would put the funds back into the account, but now (after 2 months) they are refusing, saying they can't because they already sent the withholding taxes to the IRS.
The bank has also stated they have never encountered this and are unsure how to proceed.
Can and how does this withdrawal get reversed, since the check was never cashed, and cannot be cashed since it is in his name only?
Any information or guidance regarding this unique situation would be appreciated.