Keep Your Beneficiary Designations Updated

The Supreme Court of the United States recently declared that a divorce decree does not override beneficiary designations.  In Kennedy v. Plan Administrator for DuPoint Savings and Investment Plan, the plan participant married in 1971, and completed a beneficiary designation in 1974.  No contingent benefiary was named.

The two divorced in 1994.  Under the divorce decree, the ex-wife waived any rights she had in the plan.  However, the beneficiary designation form was never updated.  Kennedy wanted the assets under the plan, $402,000 to go to his daughter, but never updated the form (he did update the forms for a different plan).  The daughter, also executor of the estate, wanted the Plan administrator to distribute the assets to her, but they would not because the beneficiary designation form still listed the ex-wife.

The court noted that a qualified domestic relations order (QDRO) can override a beneficiary designation, but that a signed divorce decree cannot. Whether this decision by the court extends to other agreements is unclear, but what is clear is that the designation form carries significant weight, and should be updated regularly.

A thorough financial plan should include periodic review of these and other forms, and you should review these (as well as all other estate plan documents) whenever a significant life event occurs.