A reminder to individuals who are divorced to change the beneficiaries on life insurance and retirement accounts. Unfortunately, all too frequently an
ex-spouse will be the individual designated as the beneficiary on a life insurance or retirement accounts. The surviving spouse is sometimes left with little or no liquid assets for their daily living needs.
A recent case in the U.S. Supreme Court, Kennedy v. Plan Administrator for DuPont Savings Plan, demonstrates the importance of updating your beneficiary
designations after a divorce. Kennedy was an employee of Du Pont and invested in the company’s Savings & Investment Plan (SIP). He designated his wife as the beneficiary of the SIP account. A few years later the couple divorced and the dissolution decree divested his wife of all interest in the SIP account. Mr. Kennedy did not execute a new beneficiary designation. At the time of his death his ex-wife was still listed as his primary beneficiary rather than his children. When Mr. Kennedy died, Du Pont paid the proceeds of the SIP, which was about $400,000 to his ex-wife.
The case went all the way to the U.S. Supreme Court which held that the payment to the ex-wife was proper. The fact the divorce decree had divested the wife of her interest in the account was not sufficient since the husband had to change the beneficiary by signing a new designation.
If you are divorced you MUST change the beneficiary on your life insurance and retirement accounts if you no longer wish your ex-spouse to receive the benefit.
Plan administrations and insurance companies can and do pay the funds to the ex-spouse to the detriment of a new spouse and children. The law firm has had several spouses be denied benefits due to the failure of the divorced spouse changing the beneficiary forms.
If you had a living trust with an ex-spouse, you need to create your own living trust and change your beneficiary designations if necessary.