Education PlanningA Ruling to Remember: Kennedy vs Plan Administrator for Dupont Savings & Investment Plan

When dealing with ERISA plan money to a non-spouse, make sure to obtain both spousal consent and properly update beneficiary forms.

In 1971, William and Liv Kennedy were married. Three years later, in 1974, William updated his beneficiary form on his DuPont Savings and Investment plan, naming Liv as his only beneficiary. In 1994, after twenty-plus years of marriage, William and Liv divorced. As part of their divorce agreement, Liv waived her rights to any benefits under William’s DuPont plan. Although this waiver was properly obtained, William never changed the beneficiary designation from Liv to the couple’s daughter, Kari.

When William died in 2001, a dispute arose between Kari Kennedy and her mother as to who was the rightful owner of the DuPont funds. After disagreement among the lower courts, the U.S. Supreme Court ultimately determined that you pay who’s on the beneficiary form. In other words, the beneficiary form trumped the waiver. As a result, Kari was left with nothing.

“My father expressly did not want my mother to have another red cent after their divorce was final. There’s no doubt in my mind that he wanted me to have everything he had.” – Kari Kennedy

What happened?

Naming someone other than a spouse as the beneficiary of a 401(k) or other Employee Retirement Income Security Act (ERISA) plan is a two-step process. The first step is obtaining a spousal waiver, which says the spouse does not have to be the beneficiary of the plan funds. The second step is updating the beneficiary form, naming the intended non-spouse beneficiaries. This second step is equally as crucial as the first step. Failure to do so in this case led to Kari Kennedy’s disinheritance.

What you can do.

Make sure you are working with an educated advisor, who, when dealing with ERISA plan money, will make sure to obtain both the spousal consent and properly update beneficiary forms when someone other than a spouse is the desired beneficiary.

Questions?

To discuss your retirement strategy and plan, speak with an educated finance professional who stays up-to-date on all the latest changes to the tax code.

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