Beneficiary Designations: A Supreme Decision

December 30, 2009 Published Work
Connecticut Bar Association Estates and Probate Newsletter

Retirement benefits often make up a significant portion of our client's net worth. As a non-probate asset, retirement benefits pass at death pursuant to the owner's beneficiary designations on record with the plan administrator. Although we educate and advise our clients on beneficiary designations that complement their estate plan, not all clients implement this advice after they have updated their estate plan. This term the U.S. Supreme Court ruled on the validity of beneficiary designations and provided plan administrators with additional guidance for interpreting and accepting beneficiary designations.

In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan (07-636), the U.S. Supreme Court addressed whether or not a divorce decree could trump the deceased's beneficiary designation on record.

In 1974 William Kennedy designated his wife, Liv Kennedy, as the beneficiary of his savings and investment plan (SIP) at E.I. DuPont de Nemours & Company. The SIP was an ERISA "employee pension benefit plan." In 1994 William and Liv divorced. In the divorce decree Liv agreed to divest herself of all claims related to William's employment related retirement plans. William failed to revise his beneficiary designation for the SIP plan before he died in 2001. William Kennedy's daughter, Kari Kennedy, was appointed as executrix of his estate and requested that DuPont distribute the SIP funds to the estate. DuPont relied upon William's beneficiary designation and paid the $400,000 balance to Liv. The Estate and the plan administrator, alleging that it had misdirected the plan benefits because Liv surrendered her rights under the divorce decree, and the plan administrator sued Liv to recover the funds, only to discover Liv already spent the money.