Friday, July 10, 2009

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.


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Cindy Teetsel said...

This is true if the employee worked in the private sector. my husband worked for our county government and was killed on the job in Janauary 2012, he & I had gotten a dissolution in 2008 but still remained very close. In 2011we reconciled and began dating again until he asked that I & my daughter move back into the marital home we still owned together. we discussed the fact that he had not changed his beneficiary designation on his retirement or life insurance and he said it was because it was the way he wanted it to be. Three months later he was killed and his father refused to even let his coworkers notify me. ultimately his parents received all the insurance and retirement benefits that were designated to me, took control of and kicked me out of my own home and sold it below value and stuck me with a default judgement for the remainder of the mortgage. I just don't understand how the law sees this as justifiable. They didn't have a relationship with their son, but yet they had control over everything he had & did nothing he wanted done. Do I have any recourse?

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