Changing pension or life insurance beneficiaries after divorce. A Judgment of Divorce may not be enough!
Recently, the U.S. Supreme Court Case, Kennedy v. Plan Adm. for DuPont Savings and Investment Plan, ruled that an ex-spouse cannot waive an interest in a former spouse’s ERISA-governed pension plan through the divorce decree alone. The Estate sued the pension plan to recover the pension benefits wrongfully paid to the former spouse under the terms of the Judgment of divorce. In a unanimous decision, written by Justice Souter the Court held that the employer did not err in paying benefits to the former spouse even though the Judgment of divorce provided otherwise.
In light of the Kennedy decision, to ensure that a divorcing spouse’s intent to waive her interest in the pension plan is effectuated, lawyers must get the proper forms from the plan administer before the entry of the Judgment of Divorce and make sure the waiving spouse signs them contemporaneously with the entry of the Judgment.
B. Life Insurance
While, Michigan law provides that a Judgment of Divorce must either extinguish or preserve in the Judgment any and all rights of a party in any policy or contract of life insurance, endowment or annuity upon the life of another, in which the spouse was named or designated as beneficiary, or to which he/she became entitled by assignment or change of beneficiary during the marriage or in anticipation of marriage.
However, in Metropolitan Life vs. Pressley, 1996 Fed. App. 0122P (6th Cir.) the Court held that the waiver in a Judgment of Divorce is not enough. A party must also affirmatively terminate his or her spouse as a beneficiary of an insurance policy because the provisions of ERISA preempt Michigan law and the effectiveness of this statutory provision. Therefore, after entry of a Divorce decree, the party should also change the beneficiary on the life insurance, endowment or annuity or risk allowing the ex-spouse to take the asset as an unintended beneficiary.