Beneficiary Designation Voided by Marriage?

[austin3515]

Guy names his 2 adult kids as 50 / 50 beneficiaries of a sizeable account. Few years later he gets married, and makes no changes to his beneficiaries. Few year's later he dies. And now, of course, there are law suits being filed since the account was very large.

Does the marriage supercede the prior beneficiary designations? It seems that the answer is yes, but our client is asking us to provide some "hard-proof." Anybody have anything that might help? Someone must have sued about this before!!

[Kevin C]

How about 1.401(a)-20, Q&A 3? Assuming the plan has no annuity option, the full vested accrued benefit must be payable to the surviving spouse, unless the spouse properly consents to naming another beneficiary. I'm guessing there was no such spousal consent, since you didn't mention one. The plan provisions should also reflect these rules.

[Belgarath]

Was there perchance a QDRO that specified that the adult children were to be beneficiaries? That might at least get them a good chunk of the account.

[austin3515]

Doubtful at best...

[Bird]

Unless there is a spousal consent to a specific non-spouse beneficiary, or (unlikely) the plan is an annuity plan where the pre-retirement death benefit is up to 50% for a non-spouse, it goes to the wife.

And it doesn't necessarily work the other way around. In Kennedy v. Dupont (I probably read about it here), a participant got divorced but never changed the bene from his ex, and she got the benefits.

[masteff]

And since no one's hit on the standard answer yet.... what exactly does the plan document say regarding spousal consent to a beneficiary other than the spouse? At the point of marriage, that right attaches and superceeds the existing designation.

[austin3515]

I was surprised that the document did not address this point specifically, but alas it did not...

[masteff]

I was surprised that the document did not address this point specifically, but alas it did not...

If it simply says the spouse must consent to any beneficiary other than the spouse, then that alone should be sufficient to invalidate the existing designation. It need not address the point of an existing designation.

[austin3515]

This thing is bubbling up again for me, so I wasn't sure if anyone had anything new to add... I'm looking for a court case or something that says the prior designations are invalidated. Even an ERISA Outline Book site would make me happy!

[Peanut Butter Man]

The plan document should say something about spousal consent if it is a pre-approved prototype or volume submitter, because the IRS requires that language in all pre-approved plan documents.

After you check out the plan document language, check out the US Supreme's decision in Kennedy v. DuPont = http://www.supremecourtus.gov/opinions/08pdf/07-636.pdf, especially headnote 2, which states:

"ERISA provides no exception to the plan admnistrator's duty to act in accordance with the plan document. Thus, the Estate's claim stands or falls by "the terms of the plan," 29 U.S.C. section 1132(a)(1)(B), a straightforward rule that lets employers "establish a uniform administrative scheme, [with] a set of standard procedures to guide processing of claims and disbursement of benefits, " Egelhoff v. Egelhoff, 532 U.S. 141, 148. By giving a plan participant a clear set of instructions for making his own instructions clear, ERISA forecloses any justification for enquiries into expressions of intent, in favor of the virtues of adhering to an uncomplicated rule. Less certain rules could force plan administrators to examine numerous external documents purporting to be waivers and draw them into litigation like this over those waivers' meaning and enforceability."

My guess is that the plan document requires the spouse to consent to beneficiaries other than the spouse, or to waive their rights under the plan in favor of the beneficiaries. The participant was aware that he had remarried, and could have signed a new beneficiary designation after he was married which contained his spouse's consent to waiving her rights under the plan, and re-affirming his intention that his children, and not his spouse, should receive his benefits under the plan if he died, and he chose not to do so.

[austin3515]

Yes, the document says that but there is big money at stake so we need something dead on syaing "any prior beneficiary designations are null and void in the event that the participant marries." Yes, the document includes the language required by law regarding QJSA exemptions (that the participant's spouse must be the benficiary), so I have no doubt it is the answer. But still the attorney wants me to provide something that specifically says what I've mentioned.

I will forward the case you provided (many thanks) but it doesn't seem to be on target enough

[jpod]

Is there not some linkage in the plan document to the concept that the consenting spouse must be the spouse at death of the participant?

[K2retire]

Precisely why we added a sentence to our beneficiary designation forms specifically acknowledging that the form is automatically voided by a marriage after it is executed.

[austin3515]

K2 retire, excellent suggestion. HAd this been in our form, we would have EXACTLY what we need. I'll be adding that to our template...

[david rigby]

Austin,

I think the advice from Kevin in Post 2 is dead on, except you should also refer to the other parts of that reg, such as Q&A20 and Q&A25.

[Guest Tom:]

See - 10/09/1998, U.S. District Court, New Jersey, Rosemary PRATER, Plaintiff, v. AFTRA HEALTH FUND, Defendant and Interpleader Plaintiff, v. Rosemary PRATER, Judith Prater, and Dave Prater, Jr., Interpleader Defendants., 23 F Supp 2d 505, 1998 WL 704298 - Pursuant to ERISA, plan participant's legal wife at time of his death was his beneficiary under employee benefit plans providing life insurance and accidental death benefits, in absence of designation of another beneficiary by participant. Reference: Employee Retirement Income Security Act of 1974, § 205(b)(1)©(i).

[J Simmons]

Austin, have you considered having the Plan interplead the issue in federal court and let the two kids and the 2nd wife duke it out without the Plan possibly making the wrong decision about which of them should get paid? Cost of an interpleader would be much less expensive that paying out the sizeable account twice.

[austin3515]

Our advice was talk to a lawyer... I'm doing this research as a favor to one of the lawyers. In this situation, it happens to be one of the owners who passed away, and the plan is terminated. The dispute is over a rollover that took place to an IRA (to the spouse's IRA--and the kid is suing).

[Belgarath]

Ah, the warm embrace of a loving family.

My experience is that as soon as inheritance comes into play, the loving family is the exception rather than the rule. And as soon as there's a divorce and remarriage, then things turn REALLY ugly. Of course, I don't see most of the ones that go smoothly, so my perspective is somewhat skewed.

[J Simmons]

Ah, the warm embrace of a loving family.

My experience is that as soon as inheritance comes into play, the loving family is the exception rather than the rule. And as soon as there's a divorce and remarriage, then things turn REALLY ugly. Of course, I don't see most of the ones that go smoothly, so my perspective is somewhat skewed.

Like you, I have become jaded in this same aspect.