An often overlooked but eminently important area of divorce is the changing of beneficiaries on retirement plans, insurance policies and other financial instruments or holdings. Upon final settlement and with legal guidance, people who have divorced should conduct an entire review of the beneficiaries listed on their various assets, and make changes where appropriate. A recent U.S. Supreme Court ruling underscored both the importance of changing beneficiaries, and the possible adverse consequences of failing to do so.
People that missed deadlines are not always afforded an extension, regardless of explanation or intention. U.S. News and World Report (January 27, 2009) recently reported on such a case as it applies to beneficiaries and pension plans. The Report wrote, “The U.S. Supreme Court said yesterday that DuPont Co. was correct to pay a deceased employee’s retirement benefits to his ex-wire, even after she had renounced her rights to the pension during divorce proceedings.” William Kennedy, whose pension was in question, did not list his daughter as a successor beneficiary or remove his wife from the paperwork on file. As part of his divorce had included an agreed forfeiture of his former wife’s right to said pension, seemingly it was his intent was to change the beneficiary.
Regardless of any intent, the fact remains that the beneficiary page had not been changed and the Court ruled that the beneficiary information on file superceded the earlier divorce decree. The Report continued, “But William Kennedy never changed his beneficiary on the retirement account. After [he] died in 2001, his daughter, Kari Kennedy, sued DuPont to recover her father’s $402,000.00 pension.” DuPont followed their standard procedure, and federal law, as it pertained to pension beneficiaries. “The Supreme Court agreed with DuPont in an unanimous decision.” Obviously the consequences of this omission was tragic for the deceased divorcee’s heir.
Upon final dissolution of marriage, seek your legal counsel’s guidance and direction as to the changing of pertinent beneficiaries on all your financial instruments and assets. Failure to do so, regardless of good intentions could be a dire mistake.