My new Privacy Law and Policy blog is underway. This blog examines privacy law issues that include:
During a divorce, spouses often enter into an agreement which becomes a court order pertaining to their assets and property rights. Some agreements include a waiver of certain future retirement benefits or other payments. This may not be enough, however. Plan documents should be consulted and beneficiary forms should be updated accordingly to prevent the situations like the one that occurred in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan (PDF flle). In Kennedy, an estate tried to recover $402,000 that was paid to an ex-spouse. In the divorce, the wife gave up her rights to the husband's pension or other work-related benefits. However, the husband failed to remove his ex-wife as the beneficiary of his investment plan assets. Following his death, the funds went to the ex-spouse. Prior to this Supreme Court decision, various courts had reached different conclusions about this type of issue (This post follows my prior post, Rolling Over in His Grave--Another Lesson in Costly Beneficiary Form Mistakes.)
The Court, in Kennedy, found plan benefits can be waived under a divorce decree, however, "...the plan administrator did its statutory ERISA duty by paying the benefits to [the ex-spouse] in conformity with the plan documents.”
So the ex-spouse keeps the money, or does she? A footnote indicates the estate might still be able to pursue an action against the ex-spouse to recover the funds. An analysis at the Scotus Wiki states,
Beneficiary designation forms may appear simple, but think twice about how your estate plan or divorce relates to them.The Court, in a footnote, left open the question of whether the estate could have sued to recover the benefits from Liv after she received them. The footnote mentioned prior rulings that seemed to say that a prior contractual agreement to forfeit funds may be enforceable after the distribution without violating ERISA; once the money is paid out, it loses its ERISA protection, those rulings had indicated.
