When a husband and a wife (the parties) get divorced, “qualified”
plans such as 401k plans are divided by the husband and wife by means of
a Qualified Domestic Relations Order (a QDRO) which is a court order
directing the plan administrator to break up the participant’s 401k into
a portion for the “participant” and a portion for the “alternate
payee”. The parties can also waive the pension rights of the other in a
Property Settlement Agreement (the “Agreement”).
In one case decided in March of this year, the parties waived rights to the pensions of the other in their Agreement. The husband had previously (before the divorce) named his wife as his beneficiary of the 401k. After the divorce a QDRO was never completed, the husband did not change his beneficiary and he died. Due to a prior decision decided by the US Supreme Court in 2009, the wife received the total 401k plan because she was the named beneficiary even though she had waived it.
But the recent case was brought before the Third Circuit Court of Appeals and it was decided that although the surviving wife was entitled to the proceeds because she was the named beneficiary on the plan documents, the estate of the deceased participant could sue her under the contract (the Property Settlement Agreement) for the benefits she wrongfully received due to her waiver of those benefits.
This case reminds us all to follow through after a divorce. First, all assets should be reviewed to make certain that your ex-spouse is not your named beneficiary; and, secondly, you must make sure that all QDROs are completed as soon as possible after you are in court.
I would not want to be the attorney for the participant who died. The attorney’s fees to file such an appeal through the Federal Courts must have been very high and my guess is that a malpractice case will be brought by the estate of the husband against his attorney.
In one case decided in March of this year, the parties waived rights to the pensions of the other in their Agreement. The husband had previously (before the divorce) named his wife as his beneficiary of the 401k. After the divorce a QDRO was never completed, the husband did not change his beneficiary and he died. Due to a prior decision decided by the US Supreme Court in 2009, the wife received the total 401k plan because she was the named beneficiary even though she had waived it.
But the recent case was brought before the Third Circuit Court of Appeals and it was decided that although the surviving wife was entitled to the proceeds because she was the named beneficiary on the plan documents, the estate of the deceased participant could sue her under the contract (the Property Settlement Agreement) for the benefits she wrongfully received due to her waiver of those benefits.
This case reminds us all to follow through after a divorce. First, all assets should be reviewed to make certain that your ex-spouse is not your named beneficiary; and, secondly, you must make sure that all QDROs are completed as soon as possible after you are in court.
I would not want to be the attorney for the participant who died. The attorney’s fees to file such an appeal through the Federal Courts must have been very high and my guess is that a malpractice case will be brought by the estate of the husband against his attorney.
