Many may recall the 2009 lawsuit, filed by a Texas woman whose father died in a car crash in 2001, against his employer. The case, KENNEDY V. PLAN ADMINISTRATOR FOR DUPONT SAVINGS AND INVESTMENT PLAN, 555 U.S. 285, was filed because William Kennedy’s daughter, Kari Kennedy, felt as though the $402,000 savings and investment plan proceeds should not have gone to her mother. Her parents divorced decades earlier and Kennedy argued her mother, Liv, had signed a general waiver divesting, or releasing, her interests in the savings and investment plan (SIP) years earlier; therefore, the funds should not have gone to her.
Lack of Clarity
Kari Kennedy, the named executrix of her father’s estate, believed the funds should have gone to the estate instead of her mother (who passed away in 2007). Her mother had moved to another country years earlier, agreed that the money was not hers, but spent it anyway. There was no Qualified Domestic Relations Order, or QDRO, which would have allowed the ex wife to bypass any claims to her ex -husband’s estate. Because of that, DuPont followed the orders in the SIP and the money went to Liv Kennedy anyway.
The Role of ERISA
DuPont, for its part, argued its only responsibility was to follow through with the documents it had on file. William Kennedy believed that the divorce and his ex-wife’s subsequent signing of the waiver removed her from the dynamic. He believed that overrode any earlier documents, including the Employee Retirement Income Security Act, or ERISA. ERISA is a federal law that regulates employee benefits plans in the private employment sector. It can include everything from profit sharing to 401 (k) to health benefit plans. DuPont argued the absence of the QDRO left it no choice but to act in a way that was in line with what Kennedy had arranged for in the original plans. DuPont argued it could not release the funds to the estate and remain compliant with the law, even as Kari Kennedy insisted the company had violated ERISA.
Through the Courts
After a Fifth Circuit ruling, it looked as though Kari Kennedy might have won her argument; however, the case eventually made its way to the Supreme Court and it ruled the general waiver was insufficient to waive interests or rights under ERISA. Those specific documents must be changed before an employer can be expected to look to other sources for direction. Further, the Surpreme Court said it placed too big of a burden on estate administrators to search for the proverbial needle in a haystack were they required to seek out any kind of external documentation that may or may not exist. In other words: it’s up to each of us to ensure there’s a uniform change across all of the documents that play a role in our estate planning purposes.
It’s also a perfect reminder that even the seemingly small details can have huge impacts for our families after we’re gone. Sure your estate plan is current? As we get ready to close out 2013 and head into a new year, the time is right to do a bit of housecleaning so that we go into 2014 with no worries about our family’s well-being in the years after our death. After all, it’s a huge gamble anytime we use “pretty sure” as a way to describe our estate plans.