A new Supreme Court decision illustrates the importance of making sure your beneficiary designations are up-to-date. The Court has unanimously ruled that an employer must distribute a deceased employee's retirement benefits to his ex-wife even though she had renounced the benefits in their divorce. Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan (U.S., No. 07-636, Jan. 26, 2009).
William Kennedy worked for DuPont Co. and had a retirement plan through the company. His wife, Liv, was the designated beneficiary of the plan. In 1994, William and Liv divorced and the divorce decree stated that Liv waived the right to any of William's retirement plans. However, William never changed the beneficiary designation on his retirement plan. When William died, his daughter, who was the executor of his estate, asked DuPont to distribute the plan to the estate. But DuPont relied on William's beneficiary designation and instead distributed the plan benefits, totaling $402,000, to Liv.
William's estate sued DuPont under the Employee Retirement Income Security Act (ERISA), claiming that in signing the divorce decree, Liv had voluntarily relinquished, or waived, her right to the plan benefits. A U.S. district court ordered DuPont to pay the value of the plan to the estate. Liv appealed and the U.S. Court of Appeals for the Fifth Circuit reversed the district court's ruling, holding that Liv had not waived her right to the plan benefits. DuPont then appealed.
In an opinion written by Justice David Souter, the U.S. Supreme Court agrees with the Court of Appeals and holds that according to ERISA, DuPont had to follow William's instructions on the original document and distribute the retirement benefits to Liv. The Court notes that William had an easy way to change the beneficiary designation, but he chose not to.
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