Estate Planning

US Supreme Court Awards Retirement Plan to Ex-Spouse

By Gregory Herman-Giddens

If you divorce, make sure that you change your retirement account beneficiaries!  As obvious as that advice sounds, it is not uncommon, particularly when there is no remarriage, for one to forget to designate a new beneficiary. Even a waiver signed by your former spouse may not be effective to prevent him or her from getting the benefits upon your death.  This report on a recent United States Supreme Court case is courtesy of the NAELA e-newsletter:

The decedent did not change the plan beneficiary after the divorce, but the executrix contended that the spouse waived her rights to plan benefits and thus the benefits reverted to the estate. The plan administrator argued that the waiver was an alienation of the benefits which was prohibited under the Employee Retirement Income Security Act of 1974, 29 U.S.C.S. § 1001 et seq. (ERISA), and that the waiver was not a qualified domestic relations order (QDRO) as required to be exempt from the anti-alienation provision. The Court unanimously held that the spouse's waiver did not violate the anti-alienation provision, but the administrator properly distributed benefits to the spouse. The spouse's waiver was not rendered invalid as an assignment or alienation of the benefits since the spouse did not attempt to direct her interest in the benefits to the decedent's estate or any other potential beneficiary. However, since the waiver was not a QDRO, the plan required the decedent to change the plan beneficiary or the spouse to expressly disclaim the benefits and, in the absence of either event, the administrator was required to distribute the benefits to the spouse as the named beneficiary under Egelhoff v. Egelhoff, 532 U. S. 141, 148 (2001).

Kennedy v. Dupont Savings and Investment Plan, 2009 U.S. LEXIS 869 (January 26, 2009)

Full post as published by North Carolina Estate Planning Blog on February 17, 2009 (boomark / email).