A premarital agreement in which a couple waived rights to each other's employee savings and retirement accounts cannot prevent the surviving spouse from receiving pension benefits under ERISA. Hagwood v. Newton (U.S. Ct. App., 4th Cir., No. 01-1909, Feb. 26, 2002).
A month before their marriage in 1995, Toni Odom and Charles Newton signed a premarital agreement stating that the property of each would remain separate after their marriage and explicitly waiving any right to each other's property. The couple worked for the same company and each was a participant in the company's Employee Stock Ownership Plan (ESOP) and its Savings and Security Plan (SSP). In the agreement, Mr. Newton specifically waived any rights that he had in Ms. Odom's "employee savings and security plans and retirement accounts." A year later, Ms. Odom began experiencing symptoms of a rare and fatal brain disorder. As her health declined, Ms. Odom executed a power of attorney in favor of Mr. Newton. On January 12, 1998, Mr. Newton exercised the power to designate himself as beneficiary on the ESOP and SSP. Ms. Odom died two weeks later.
Ms. Odom's estate and her father sued Mr. Newton seeking to enforce the terms of the premarital agreement and to reverse Mr. Newton's actions in designating himself the beneficiary of the ESOP and SSP. The district court entered judgment for Mr. Newton, reasoning that the ESOP and SSP were governed by the Employee Retirement Income Security Act (ERISA), which requires that pension plans of deceased participants provide to the surviving spouse a "qualified preretirement survivor annuity." 29 U.S.C. § 1055(a)(2). A spouse can waive his or her rights to this annuity only by designating in writing another beneficiary. The court concluded that the premarital agreement did not constitute an effective waiver of benefits under § 1055. The estate appealed, arguing that the agreement had the effect of a post-marriage waiver because the intent of the parties was clear.
The U.S. Court of Appeals for the Fourth Circuit affirms. The court rules that when Mr. Newton signed the premarital agreement, he was not Ms. Odom's spouse and therefore could not satisfy the requirement of § 1055(c) that "the spouse of the participant consent[ ] in writing to such election [to waive]. "Although Newton clearly indicated in the Premarital Agreement that he intended to and indeed would waive such rights when he became married," the court writes, "he did not, after he became married, execute a formal waiver giving up the spousal rights that he then acquired."
For the full-text of this decision, click here
Did you know that the ElderLawAnswers database now contains summaries of more than 2,000 fully searchable elder law decisions dating back to 1991? To search the database, click here.
Subscribe to the Knowledge Bank.
