Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick P. Niemann, Esq., a Probate and Estate Administration Attorney

A new Supreme Court decision illustrates the importance of making sure your beneficiary designations are up-to-date. The Court has unanimously ruled that an employer must distribute a deceased employee’s retirement benefits to his ex-wife even though she had renounced the benefits in their divorce. Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan (U.S., No. 07-636, Jan. 26, 2009).

William Kennedy worked for DuPont Co. and had a retirement plan through the company. His wife, Liv, was the designated beneficiary of the plan. In 1994, William and Liv divorced and the divorce decree stated that Liv waived the right to any of William’s retirement plans. However, William never changed the beneficiary designation on his retirement plan. When William died, his daughter, who was the executor of his estate, asked DuPont to distribute the plan to the estate. But DuPont relied on William’s beneficiary designation and instead distributed the plan benefits, totaling $402,000, to Liv.

William’s estate sued DuPont under the Employee Retirement Income Security Act (ERISA), claiming that in signing the divorce decree, Liv had voluntarily relinquished, or waived, her right to the plan benefits. A U.S. district court ordered DuPont to pay the value of the plan to the estate. Liv appealed and the U.S. Court of Appeals for the Fifth Circuit reversed the district court’s ruling, holding that Liv had not waived her right to the plan benefits. DuPont then appealed.

In an opinion written by Justice David Souter, the U.S. Supreme Court agrees with the Court of Appeals and holds that according to ERISA, DuPont had to follow William’s instructions on the original document and distribute the retirement benefits to Liv. The Court notes that William had an easy way to change the beneficiary designation, but he chose not to.

If you have any questions, contact Fredrick P. Niemann, Esq. at 732-863-9900, or fniemann@hnlawfirm.com.  He is happy to answer your inquiries.

Punitive Damages Okayed in Probate Case:

The New Jersey Supreme Court on July 22, 2008 considered the circumstances in which it is appropriate to award punitive damages against a fiduciary in a case involving Wills, Trusts, Probate proceedings and lifetime transfers.
 
In this case, a lawsuit was filed against a doctor who was alleged to have persuaded the decedent to transfer a large home in Spring Lake, New Jersey to him in lieu of the local Volunteer First Aide Squad who was the prior testamentary beneficiary under her Last Will and Testament.  In its analysis, the Court concluded that the remedy of punitive damages is limited to situations where an individual (who is essentially a stranger to the testator) gains access to him or her through undue influence and then carries out a scheme to place himself or herself in a position to seize control of the testator=s (decedents) assets through a lifetime transfers or a bequest under their Last Will and Testament.  The Court generally opinioned that any punitive damage award arising in such a case filed in the Probate Division of the Superior Court must be in compliance with the New Jersey Punitive Damages Act.  This remedy will be infrequent and limited to circumstances in which the person who received the lifetime gift or bequest is an individual who otherwise cannot be punished through a lesser available remedy by the Probate Court. Because of the unique facts of this case, an award of compensatory damages and potentially punitive damages was available.   The case was remanded back to the Probate court for further determination of the issue of compensatory and punitive damages in light of the Supreme Court decision.  This case is significant for the proposition that Executors, beneficiaries of lifetime and testamentary gifts when obtained through undue influence, suspicious circumstances, etc.  can be held personally liable for punitive damages.