U.S. Supreme Court Decision Emphasizes the Importance of Updating Your Beneficiary Designations After Divorce

The decision of the United States Supreme Court in Kennedy v. Plan Administrator For DuPont Savings Plan stresses the importance of updating your beneficiary designations after a divorce. The Kennedy case is a classic example of the black letter law requiring an inequitable result.

William Kennedy worked for the DuPont Company and participated in its savings and investment plan (SIP). In the 1970’s, he married Liv Kennedy and a few years later he designated her as a beneficiary on his SIP account. Mr. and Mrs. Kennedy divorced in 1994 and the divorce decree divested Liv of all interest in the SIP account. For whatever reason, Mr. Kennedy failed to sign a new beneficiary designation form, removing Liv and substituting his children. Mr. Kennedy died in 2001 and DuPont paid the SIP account, consisting of $400,000, to his ex-spouse.

The U.S. Supreme Court held that DuPont’s payment of the account to Liv was proper. The basis for the decision was that the Employee Retirement Income Security Act of 1974 (ERISA) requires plan administrators to follow the documents and instruments governing the SIP. Although the divorce decree divested Liv of her interest in the account, Mr. Kennedy was still required to update the beneficiary designation form.

The lesson is that we all need to maintain a file for our various assets, request a copy of our beneficiary designations, and periodically review these designations.