Beneficiary Designation

[Guest Badger]

A participant dies following his divorce. Prior to the divorce, the participant had designated his spouse as the primary beneficiary of 50% of his vested account balance and another person as the primary beneficiary of the remaining 50%, but he did not get his spouse's written consent to that desigation. (The plan is not subject to the annuity rules.) The participant does not change his beneficiary designation after the divorce, he does not remarry, and the plan does not automatically invalidate the designation due to the divorce. Does the lack of spousal consent to the beneficiary designation invalidate the entire beneficiary designation? Or does it only invalidate the portion that related to the non-spouse beneficiary?

[namealreadyinuse]

You are on the right track. Spousal consent is required. You are going to be bound by the plan and form language on the spouse's designation though. It probably only wipes out the non-spouse 50% though. You should also consider whether state law "redesignation" statutes apply after the divorce (state law issues and preemption).

[Guest mjb]

The Plan administrator must retain counsel to determine who is the proper bene.

There are several possibile options:

1. ex spouse is entitled to 100% of account because non spouse designation was invalid when made and ee did not remove spouse after divorce. Therfore ex spouse is sole bene. under plan beneficary designation.

2. designation is invalid and therfore there is no valid bene designation, no spouse and benefits are to be paid under the default option in plan. eg. to employee's children or estate.

3. ex spouse is entitled to 50% of benefit and other 50% is to be paid under default option.

4. other combinations depending on plan language.

Under US Supreme ct decisions state laws removing spouse as bene after divorce are preempted and payment is to be made under plan language. There are cases where fed cts have held that failure to remove ex spouse as designated bene after divorce manifests intent to continue ex as bene. under plan.

Last option is to file interpleader in fed ct to have judge determine who is the bene but plan will have to pay $ for cost of preparing complaint.

[Everett Moreland]

http://www.ca9.uscourts.gov/ca9/newopinion...pdf?openelement

As a follow-up to mjb's post, see the 9th Circuit decision at the above link