One potential pitfall following a divorce is failing to change beneficiaries on various plans from your ex-spouse to someone else (unless you want your ex-spouse to inherit your assets). A case is now before the US Supreme Court dealing with this exact matter. In a divorce decree between William and Liv Kennedy, the wife waived her right to his retirement account (in exchange for other assets). However, he forgot to change the beneficiary to his daughter Kari with his former employer. Upon his death, the $402,000 account went to Liv Kennedy since she was listed as beneficiary. The main federal law on employee benefits requires companies to follow strictly their workers’ wishes as reflected in their designations.
Daughter Kari is also the executor of the estate and sued to obtain the money that she feels her father expressly did not want his ex-wife to get. The trial judge sided with the estate and order the company to deliver the funds to the estate. An appeals panel overturned that decision. Now the Supremes will get their say. The case is Kennedy v. Plan Administrator, 07-636.
The lesson here is that once your divorce is final, remember to change the beneficiaries on all of your accounts if that’s what you want. Also, remember to change contact information and the like (name changes if applicable) with financial accounts, insurance, employers, etc.