Divorce Decree Waiver Not Enough To Divest Ex’s Life Insurance Interest Under ERISA
The U.S. Supreme Court has ruled that a divorce decree waiver is notsufficient to divest a spouse of their interest in a life insurance policy under ERISA (Employee Retirement Income Security Act). So, naming your spouse as your life insurance beneficiary continues “till death do you part” – unless you remove them.
U.S. Supreme Court case
The facts of this case that made it all the way to the U.S. Supreme Court are fairly straight forward. A husband named his wife as the beneficiary on his life insurance policy. The couple then divorced and the wife signed a document indicating that she waived her rights to the husband’s life insurance benefits. However, the husband never removed her as beneficiary on the policy. When the husband died, the plan administrator paid the ex-wife approximately $400,000. The husband’s family protested and pointed to the divorce decree waiver.
A trial court ruled in their favor. However, an appellate court reversed that decision and the U.S. Supreme Court recently agreed with the appellate court – ruling that a divorce decree waiver is not enough to divest an ex-spouse’s interest in a life insurance policy under ERISA. In a unanimous decision, the court stated that the divorce decree did not constitute an assignment or an alienation under §1056(d)(1) of ERISA because the wife did not attempt to direct her interest in the plan benefits to the estate or any other potential beneficiary. The court reasoned that:
The plan provided an easy way for [the husband] to change the designation, but for whatever reason he did not. The plan provided a way to disclaim an interest in the [pension] account, but [the wife] did not purport to follow it. The plan administrator therefore did exactly what §1104(a)(1)(D) required: 'the documents control, and those name [the ex-wife].’
Make sure that your benefits go to the people you wish to receive them. Contact an experienced estate planning attorney to discuss your situation and estate planning needs. Consultations are generally free, without obligation and are always strictly confidential.