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Alternate payee died before divorce settlement


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Marriage was bifurcated, (due to age and health of both parties both in their 80s and respondent has Alzheimer’s)   court hearing set to address community property but continually postponed by petitioners and respondent’s lawyers.  After 18months -  Petitioner’s attorney never filed a DRO.  Petitioner’s health declines and has a guardian ad litem.  Petitioner subsequently dies but the retirement benefits had not been addressed by the courts.  2/12 years later a court date is set to address retirement benefits and petitioner’s estate is now filing a DRO.  Will petitioner’s alternate payee status flow to her estate in a defined benefit plan?  Will there be any ramifications if petitioner’s council didn’t file the DRO while his client was alive?  

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From your description, I can’t tell what is going on. If the plan has never been notified of the proceedings and the participant has died, and I were advising the plan, the designated beneficiary would get the benefits, mutatis mutandis if the benefits are in annuity form. A lot depends on what has been communicated to the plan, and what the plans standards are for processing a domestic relations order.

State law has a lot to do with this as well with respect to division of marital assets and death of a party before entry of judgment, QDRO law aside. You may never get to the plan.

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So, they are trying to file a DRO to seek roughly 18 months worth of benefit payments, from the divorce date to the AP's death?  Benefits that were already paid to the participant, btw.  I don't see that the Plan has any possible liability here.  For example, if we go back in time to the date of divorce and split the benefit payment, the AP is on a lifetime annuity that ends when she dies.  The bigger issue would be the 50% reduction to the participant benefit that is now lost to anyone once the AP dies, it's not as if that payment reverts back to the participant for the remainder of his time.  There's no way the AP's estate can force any reduction to the future payments on that basis, because they don't have an eligible recipient!  If they really want their lb of flesh for the 18 months of benefits she could have possibly earned, they need to go after the participant who received and enjoyed them.  The Plan should engage an ERISA attorney to put this in fancier legalese and rebuff any attempt to submit a DRO against them.

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Actually they (alternate payee’s estate) are filing (suing the participant) for retroactive payments from to the date of the bifurcation until participant dies (who by the way is still alive).  They (Alternate payee’s legal team) brought in an actuary and established his (participants)  life expectancy to try and offer a settlement to the respondent.  AP’s estate wants retroactive payments as well as payments moving forward until participant dies.

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Just for fun (what is your interest in the matter?), let's infer (because you don't give enough information to avoid a lot of speculation, which I don't find amusing -- speculating, I mean, because is is not very productive) that the DB plan is paying either a life annuity or a J&S annuity with the deceased former spouse as the contingent annuitant.  Although the plan could be designed to accommodate other arrangements, I am going to take the strict approach that I advise for my clients.  The benefit is now effectively a life annuity for the participant, and any assignment of benefits is going to be in the form of designated prospective payments from the payment stream, which might be commonly envisioned a  "separate payment" approach.  I am at a loss to see how the AP (or AP's estate, and I use the term AP even though I don't think there is an AP) can get anything.  I would advise the plan that the description of the prospective separate payments (whether or not calculated to capture retroactive payments over some time) could not include a time frame greater than either the participant's or AP's life.  The AP is dead, so the separate payments stop before they start.

Unfortunately, the DOL soiled its pants in its efforts to comply with the Congressional mandate to provide guidance in the complex circumstances of death of a participant or spouse before a proposed QDRO is qualified.  The DOL pretty much left us with nothing.  It could have provided some guidance into these difficult and interesting issues that arise under DB plans.  Other outcomes may be possible, but I think the plan can refuse to pay because I cannot think of a payment scheme envisioned by the AP that does not require the plan to pay in a manner or form that the plan is not designed to pay, at least as I assume this plan to be designed.

You also have to consider, which I am not, whether or not state law is going to look favorably on a deceased party with respect to future qualified retirement benefit payments.  The estate might have an interest in payments already made, but that would be against the individual rather than through the plan.  And if the state is California, all bets are off from the perspective of ERISA-governed matters because of the travesty of how California domestic relations law tries to strong-arm qualified plans.

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Your post did not state if the Plan was ERISA qualified and whether it was a defined contribution Plan or a defined benefit Plan.  Defined benefit plans that are covered by ERISA benefit from the Pension Protection Act of 2006 that authorizes the entry of a post-mortem QDRO.  See 29 CFR 2530.206, and read Yale-New Haven Hospital v. Nicholls, No. 13-4725-CV, United States Court of Appeals (2nd Cir. 2015).  And even in cases where a Plan is not ERISA qualified, some states are allowing the entry of nunc pro tunc QDRO that will predate the death of the Participant.  See the attached Memo. 

Here are a few interesting cases

 Lammers v. Rumsfeld, 345 F. Supp. 2d 604 (ED VA 2004) at -
http://law.justia.com/cases/federal/district-courts/FSupp2/345/604/2572780/
the New York court granted the divorce without addressing marital property (a common practice in New York).  The husband/Military Member died before the trial court addressed property issues, including the Member's Military retirement and the award of Survivor Benefit Plan ("SBP") annuity benefits to the Former Spouse.  After the death of the Member, the Former Spouse was no longer a "surviving spouse" or a "former spouse" and was therefore not entitled to receive SBP annuity benefits.  Said the Court:

       “The statutes governing the SBP specify that the primary beneficiary of annuity payments is the "surviving spouse" of the former service member. 10 U.S.C. § 1450(a) (1). A "surviving spouse" is a "widow or widower," and a "widow" includes a person who is "the surviving wife of a person who, if not married to the person at the time he became eligible for retired pay(A) was married to him for at least one year immediately before his death..." 10 U.S.C. § 1447(9) and (7). The statute does not, however, define the meaning of the word "wife." While Dr. Frothingham Lammers asserts that she was still Col. Lammers' wife at the time of his death since only half of her bifurcated divorce had taken place, the ABCMR found that she was not his wife because the New York court involved in her divorce had already entered a decree dissolving the marriage and allowing Dr. Frothingham Lammers to commence using her maiden name.”

    In Claxton v. Reeves, No. 5-17-0200, Appellate Court of Illinois, Fifth District (2019), found at -
https://scholar.google.com/scholar_case?case=5125728826242549427&hl=en&lr=lang_en&as_sdt=20000006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:3751503034025094227:AAGBfm1X5pCLNj_zA2qyIsmi1Camy5g4Rw
the husband was a Participant in a firefighters Plan not covered by ERISA, and the Appellate Court reversed the trial court’s grant of a bifurcated divorce that deprived the Alternate Payee of survivor benefits with no benefit to the Participant’s estate.  
And see the recent case of In the Matter of Marriage of Thrailkill, Kansas Court of Appeals, No. 118,246 (2019), -
https://scholar.google.com/scholar_case?case=3170749461376187630&hl=en&lr=lang_en&as_sdt=20006&as_vis=1&oi=scholaralrt&hist=bY5nDLcAAAAJ:10525132011850598234:AAGBfm14Zs395CFlj3Jd2ZpJKn6zMsb-zw
another bifurcated divorce situation.  The Kansas Court concluded that the provisions of 
10 USC 1448(b)(3)(A)(iii) did not apply since the “divorce” in Kansas was somehow not really a “divorce, dissolution or annulment” since it did not deal with the property issues.  It will be interesting to see how the Military interprets the Kansas “divorce”.  

Here in Google Scholar you will find pretty much every case in the US where "bifurcated divorce" and "death" appear in the same case.  https://scholar.google.com/scholar?hl=en&as_sdt=ffffffffffffe04&q="bifurcated+divorce"+death&btnG=

And here are case where "bifurcated divorce" and "nunc pro tunc" are discussed.  

David Goldberg


 

Post Morten and Nunc Pro Tunc Memo.pdf

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Bifurcated mess, just for BenefitsLink friends’ curiosity:

Which spouse asked the court to grant a bifurcated divorce?

Did the participant ask?

Or did the would-be alternate payee ask?

Did the spouses together assent to the bifurcated divorce?

Or did the court grant it despite a spouse’s opposition?

For ERISA practitioners who might not know the concept, a bifurcated or divisible divorce is “[a] divorce whereby the marriage itself is dissolved but the issues incident to the divorce . . . [which might include dividing property] are reserved until a later proceeding.” Divorce, divisible divorce, Black’s Law Dictionary 603 (11th ed. 2019).

California Family Code § 2337 https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=2337.&lawCode=FAM

California Rules of Court https://www.courts.ca.gov/cms/rules/index.cfm?title=five&linkid=rule5_390

Since (at least) the mid-1980s, family lawyers’ mainstream guidance is that a spouse who might want some portion of the other’s pension should oppose bifurcation because a divorce defeats one’s pension rights as a spouse or surviving spouse.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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 All of the information in the replies are greatly appreciated.  I’m trying to decide if I should settle or go to court (California) on behalf of my dad.  I am the POA, Guardian ad litem, of the respondent.  His retirement plan is 50% J&S annuity, ERISA qualified, defined benefit plan.  Since the bifurcation ( mid 2019), he had been receiving 100% of his benefits because opposing counsel never filed a DRO.  But oddly enough they did subpoena his bank and retirement accounts twice. She was getting court appointed spousal support as well as funds for her attorney fees.  She was ordered to move out  late 2019) due to her abusive behavior towards my father and given funds from respondent to do so.   Ex spouse became unable to care for herself (mid 2020) so I acknowledged and agreed that her daughter be assigned as her Guardian ad litem (I was guilty of being ignorant to the fact that she would do this to my father).  Ex spouse died late 2020 and her guardian ad litem stepped into finish the community property/retirement issues with the court.  The guardian for the ex spouse is now representing the estate for the case trying to get arrears as well as half (community property in California) of the retirement benefits until my dad dies.  They had an actuary compile numbers which estimated  6 years of payments that they will be owed.  
Wouldn’t the opposing counsel be considered negligent because they never filed a DRO while ex spouse was still alive?  She should have been receiving the retirement  benefits while she was alive but now they are claiming the payments will flow through to her estate via a QDRO.  

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You need legal advice that you cannot get in this forum.  First, you need advice about what the deceased former (?) spouse can get under California domestic relations law.  That seriously narrows the field of of contributors to this forum and is the starting point for questions about what can be obtained from the pension plan.  The assertion of the other side about what is deserved or attainable cannot be trusted either with respect to California law or the pension plan.  Unfortunately, expertise about state domestic relations law and QDRO law do not often come in the same package.  Whether or not the estate's lawyer or former lawyer committed malpractice is interesting for settlement purposes, but not what might effectively be asserted against your father's property.

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... and please, use the correct spelling: counsel.

 

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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1 hour ago, Bifurcated mess said:

Corrected spelling error.  

Ah well, some people think 1 out of 2 ain't bad.

I'm a retirement actuary. Nothing about my comments is intended or should be construed as investment, tax, legal or accounting advice. Occasionally, but not all the time, it might be reasonable to interpret my comments as actuarial or consulting advice.

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