By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Estate Litigation Attorney
Part 1 and Part 2 of this series discussed the importance of your beneficiary designation to your retirement accounts and the devastating consequences of not doing so. Below is the surprising outcome of the case we have been following in Part 1 and Part 2.
The Court of Appeals held that ERISA is not implicated because it requires plan administrators to distribute benefits to named beneficiaries only, and claims of money already distributed do not implicate ERISA. The court compared the estate’s claim to more of creditors suing beneficiaries of pension plans once those benefits have been distributed, where the court concluded that ERISA is not implicated because the benefits have already been distributed to the respective beneficiary. The Court of Appeals therefore stated that the Estate in this case has a claim against the ex-wife for the ERISA proceeds, since they were now owned by her, though it did not order the ex-wife to turn the pension proceeds back to the Estate.
So what does this mean? To win you now must sue the beneficiary directly once they receive the pension benefits setting forth why you are entitled to the benefits. In this case, the ex-wife waived her claim to pension benefits through a property settlement agreement (PSA). The PSA was incorporated into a court order. Therefore the court ordered the ex-spouse to disclaim any interest he or she had in the pension, so the ex-spouse must now turn the money over to the estate. This ruling will likely apply to other cases, such as when two siblings contest a pension distribution, with one claiming that the other should not receive proceeds because the parent was coerced into making the one sibling the only beneficiary. No matter what happens, the liability shifts from the plan administrator to the beneficiary, and was the goal of passing ERISA and the Supreme Court’s holding in Kennedy.
To discuss your NJ Estate Planning matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at firstname.lastname@example.org. Please ask us about our video conferencing consultations if you are unable to come to our office.