Tennessee Court of Appeals Reminds Us That Ownership and Waivers May Not Defeat Beneficiary Designations After Divorce
In a recent case the Tennessee Court of Appeals reviewed a trial court’s ruling appealed by the ex-wife of an employee of the Nashville-Davidson County Metro Government. While they were married, the husband named his wife as the beneficiary of his retirement plan at his death. The parties later divorced. The Marital Dissolution Agreement (settlement contract agreed on by the parties to settle the divorce) stated that the husband would keep ownership of “all retirement that he may have through his employment with the Metro Government.”
The husband died prior to receiving all of the benefits of the retirement plan, and both his estate and his ex-wife made a claim for the husband’s money that remained in his retirement account. The trial court awarded the funds to the husband’s estate, based on the language in the Marital Dissolution Agreement which awarded the retirement fund to husband in the divorce. The ex-wife appealed. The Court of Appeals reversed the trial court, finding that the husband’s failure to specifically notify the retirement plan administrator in writing that he wanted to remove his ex-wife as beneficiary of his retirement plan meant that she would receive the money despite the fact that they were now divorced.
The decision was based on the fact that “(t)he MetroMax Plan required the plan participant to send a written request to the plan administrator to amend or revoke a beneficiary designation. Although the MDA is in writing … Mr. Leary did not send the MDA to the plan administrator.”
The opinion does not state whether or not the Marital Dissolution Agreement in this case contained additional “waiver” provisions which are often included in such agreements, and which generally waive each party’s rights to make a claim against the property of the other at any time in the future. But the court reminds us that such general waivers will not overcome specific requirements of a plan to change a beneficiary designation by citing In re Estate of Williams, 2003 WL 1961805, at *19 (affirming ruling in favor of the beneficiary although the beneficiary had agreed in an MDA to waive any claim to husband’s annuities, when “no attempt was made to change the beneficiary in compliance with the annuity contract provisions”).
The lesson here is clear. It is not enough to simply divide property in the divorce. Any assets which pass at the death of the owner by way of a beneficiary designation (IRAs, 401-Ks, life insurance, annuities, etc.) may still pass to an former spouse if the owner of that asset fails to follow up by directing the appropriate authority (plan administrator, life insurance company, etc.) to change the old beneficiary designation.
VOYA RETIREMENT INSURANCE AND ANNUITY COMPANY v. MARY BETH JOHNSON ET AL., No. M2016-00435-COA-R3-CV – Filed October 27, 2017.