A Lesson In Paying Attention To Estate Documents & Designations

We were consulted recently by a personal representative of an estate concerning the decedent's death beneficiary of his 401(K) retirement plan. The decedent had married before ERISA became law, but executed a beneficiary form shortly afterward naming his then spouse. Later he divorced that spouse with a property settlement agreement by which spouse waived all rights to his ERISA retirement. The decree of divorce, naturally terminated her status as a spouse. But the decedent never bothered to execute a beneficiary designation naming a substitute. As the reader might suspect, decedent dies with his former wife's name on the form he executed forty years earlier.

So, the personal representative (e.g., executor) makes claim on the pension as part of the decedent's estate. The surviving non-spouse intervenes to say "Not so fast, he named me." Executor responds "You waived." Ex-wife says: "I waived the right to make a claim in an adverse proceeding, but decedent's failure to act demonstrates that he intended to retain me as beneficiary since he knew of my waiver but never named anyone else including the estate."

Our client had slightly different facts, but those recited above produced Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285. The Supreme Court of the United States decided that case in 2009 and held that absent more, the failure to change beneficiary designations after divorce means the designations will remain effective despite the intervening severance of the marital relationship. The Court's unanimous ruling states succinctly that while ex-wife waived the right to claim benefits in an adversarial sense that waiver also afforded the decedent the right to name his estate or anyone else in substitution by completing a simple form. His failure to do so must be given meaning in its own right, absent some document or instrument showing a different intent. Ironically, in this case, the decedent had named a different beneficiary for another ERISA qualified DuPont retirement plan.

Matter resolved, correct? Well, the Estate of William...