Is POA Self Dealing in ERISA

[Guest cldula]

As Power of Attorney for My grandfather I used the Illinois Statutory Short Form for POA to remove the name of my deceased grandmother as beneficiary and named myself as the beneficiary. When my grandfather died I submitted a claim for the burial insurance. The administrator of the ERISA Plan denied my claim citing that Illinois State Law forbid me to name myself as beneficiary.

Does ERISA preempt state law in this case?

Under ERISA can I name myself as beneficiary?

[401 Chaos]

Cldula,

Gifting to one's self as attorney-in-fact under a PoA can raise complicated legal issues outside of the ERISA context that vary from state to state. While ERISA preempts certain state laws, preemption does not seem to be an issue here. Afterall, you are basing your initial right to these benefits on your use of the very statutory PoA rules you would preempt. If you preempted the state PoA laws, then you would have no authority for having changed the beneficiary designation on behalf of your grandfather. Rather, the real question seems whether the change in designations made are valid under Illinois law. If the switch in beneficiary designations are valid actions under the PoA, then I suspect the Plan Adminstrator will honor them (or could be forced to do so). The trick is for you to provide the Plan legal support for your right to gift to yourself as attorney-in-fact under the PoA at issue here. States, however, often restrict the statutory ability of attorneys-in-fact to make gifts under PoAs to themselves and are also particular about changes to pension plan beneficiary designations.

If there are significant amounts involved, you would be wise to seek assistance from a law firm that has experienced ERISA and estate administration attorneys. It could also be that the benefits pass to you any way even if the change in beneficiary designations is not recognized. If there is no valid beneficiary designation on file (because your change in beneficiaries under the PoA is not recognized and the beneficiary named in the earlier, valid designation is dead), the benefits would generally pass to your grandfather's estate. From there, distribution would be governed under the terms of his will, likely as part of his residuary estate. If there is no will or the will doesn't provide for distribution of these assets as part of the residuary estate or in some other manner, then they would generally pass under Illinois' intestacy laws.