What happens when the beneficiary dies the day after the participant?

[Guest CK401K]

The participant did not designate a beneficiary so the surviving spouse is granted non-forfeitable right equal to 100% of the total value of the Partipant's account as of the date of the participant's death. The spouse dies one day later without designating beneficiaries. The problem is the estate of the spouse is being left to his stepchildren (participant's children) specifically denying his own children any interest. Should the spouse be treated as a participant in this case and the default beneficiaries be his children or should the 100% interest go to his estate where his stepchildren will get the interest at that time.

[david rigby]

The first response is the most common: What does the plan document say?

[My 2 cents]

I presume from the wording of the original post that the participant was the mother of the spouse's stepchildren (who are the beneficiaries of the spouse's will, which, for some reason, does not provide anything to that spouse's children, presumably from before the current marriage). So let's call the participant Mrs. X, the spouse Mr. X, the children of the participant little A and little B and the children of the spouse big C and big D (big C and big D presumably having been born before Mr. X was married to the participant, to a different mother than Mrs. X). Mr. X's will leaves his estate to little A and little B and nothing to big C or big D. Let us, for the time being, disregard what Mrs. X's will provides (but be it assumed that her will is unlikely to be more favorable to big C or big D than Mr. X's will).

As the participant had not designated a beneficiary, the default provisions of the plan will kick in, surely making Mr. X the beneficiary (unless the applicable state law would treat the death of Mr. and Mrs. X as simultaneous, which should be looked into, their deaths having been so close to each other, possibly as a consequence of the same event).

One defined benefit plan document that I am looking at provides for default determination of the beneficiary of the participant if "no Beneficiary designation is made by the Participant, or if the designated Beneficiary dies before the Participant or before complete distribution of the Participant’s benefits...". If the plan in question contained such a provision, then the default beneficiary (there being children) would be "the Participant’s natural and adopted children and children of deceased children, per stirpes". There would be no question that little A and little B would qualify as beneficiaries in the instance cited in the original post (being natural children of the participant). Whether anything would go to big C or big D would depend on whether they would be considered as adopted by the participant (which seems unlikely given their status under the spouse's will).

Given that the spouse's will provides nothing to his own natural children, why should they be entitled to anything from his wife's retirement account?

[Guest CK401K]

The plan document states that if a Participant is married on the date of his death, the Spouse is the sole beneficiary of such account absent spousal consent permitting distribution to an alternate Beneficiary. If any Participant shall fail to designate a Beneficiary for the purposes of this Section, or if all designated Beneficiary(ies) or successor Beneficiary(ies) voluntarily disclaim their rights to the benefits under this Plan or predecease the Participant, the Plan Administrator shall designate Beneficiaries on his behalf, but only from among persons with the following relationship to the Participant, and only in the order named: (1) spouse, (2) children, (3) other descendants, (4) parents, (5) other ancestors, (6) brothers and sisters, (7) nephews and nieces, and (8) Participant’s estate.

The issue is since the spouse died, does this beneficiary section now apply to him upon the death of the Participant and in essence treating him as the participant. Since he did not have a beneficiary form filed the order of the plan document would leave it to his natural children. I do not believe he adopted his stepchildren. We are just trying to avoid the natural children coming back and making a claim to this money. His will clearly states his intentions but we do not want to violate the plan document.

[ESOP Guy]

I am not a legal expert but here is my take on it

On day 1 participant dies so you need to look who is the participant's beneficiary.

On day 2 the beneficiary dies but at this point this person is the new participant so you need to look who is this beneficiary

Even if the record keeping system hasn't kept up with events it seem to me the Spouse took legal ownership of the benefits for one day. Then the next day they passed and now you have to see who gets the assets from that participant.

Maybe there is a lawyer out there that will tell me there is a solid legal reason to see it any other way.

However, given the risk I would recommend you don't take a position. To me this is the type of risk a lawyer is paid to take. They make a whole lot more per hour then the typical TPA or internal benefits employee. Part of the reason they are paid more is to express legal opinions for their client that they may have to defend. In short get a lawyer that knows plan law and estate law to opine on this one. That is why lawyers exist.

[MWeddell]

Besides looking at the beneficiary designation portion of the plan, also look back in the miscellaneous provisions in the document. It is somewhat common to see a provision stating that if two persons die within 72 number of hours of each other, they are deemed to have died simultaneously.

[masteff]

Besides looking at the beneficiary designation portion of the plan, also look back in the miscellaneous provisions in the document. It is somewhat common to see a provision stating that if two persons die within 72 number of hours of each other, they are deemed to have died simultaneously.

And as suggested further above, also verify state law for simultaneous death rules. IF the spouse can be deemed to have died simultaneously, then you'd go back to the original participant's beneficiary designation for secondary benes.

This may be one of those cases where filing with the court for an interpleader may be the best course of action.

And remember, your first duty is to the plan, not to someone's last will and testament. If you find a legal means to fulfill it, fine, but that will has no meaning to the plan.