A Divorce, an Unchanged Beneficiary, and $400,000: The Kennedy Case
When someone gets divorced, they may assume their former spouse no longer has a right to their retirement benefits. If the divorce decree says the former spouse gave up those rights, that assumption might seem reasonable. However, the beneficiary listed on the account can still matter.
In Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, William Kennedy’s former wife received approximately $400,000 from his employer’s savings and investment plan after his death. Their divorce decree included a waiver of her rights to his retirement benefits, but William had never removed her as the beneficiary of that plan.
His daughter, acting as executor of his estate, challenged the payment. The case eventually reached the United States Supreme Court, which decided that the plan administrator had properly paid his former wife.
How did that happen? The answer comes down to the plan’s documents and the procedures for changing a beneficiary.
What happened between William and Liv?
William Kennedy worked for DuPont and participated in its savings and investment plan, referred to as the SIP. He married Liv Kennedy in 1971 and named her as the beneficiary of the plan in 1974. He did not name a contingent beneficiary, meaning someone who could receive the benefits if the primary beneficiary did not.
William and Liv divorced in 1994. Their divorce decree included language stating that Liv gave up her rights to retirement benefits connected to William’s employment.
William did make a beneficiary change after the divorce. He named his daughter, Kari Kennedy, as the beneficiary of his separate DuPont Pension and Retirement Plan. However, he did not make the same change to his savings and investment plan. Liv remained listed as the beneficiary of that account.
This is an important part of the case. There were two separate plans, and changing the beneficiary of one did not change the beneficiary of the other.
William died in 2001. Kari became the executor of his estate and asked DuPont to distribute the SIP funds to the estate. Instead, DuPont paid approximately $400,000 to Liv because she was still the beneficiary listed under the plan.
The estate then sued DuPont and the plan administrator. It argued that Liv had already waived her rights in the divorce decree and that paying her violated federal law.
What was the legal question?
The main question was whether the administrator should follow the waiver in the divorce decree or the beneficiary designation made under the plan.
The SIP was governed by the Employee Retirement Income Security Act of 1974, commonly known as ERISA. This federal law sets requirements for certain employee benefit plans, including duties for the people who administer them.
The federal district court initially ruled in favor of the estate. The Fifth Circuit Court of Appeals reversed that decision. When the case reached the Supreme Court, the justices unanimously affirmed the Fifth Circuit’s judgment, although they reached that result using different reasoning.
Why did the Supreme Court uphold the payment?
The Supreme Court determined that DuPont properly followed the documents governing the plan.
The plan had procedures for naming a beneficiary and replacing that beneficiary. William had followed those procedures when he named Liv, but he never completed the documents needed to remove her from the SIP.
The Court explained why this matters for plan administrators. They need a clear way to determine who should receive benefits. If they had to review outside agreements and decide what every waiver meant, payments could become more complicated and lead to additional disputes.
In this case, the plan documents directed the administrator to pay the designated beneficiary. Liv was still that person.
However, the Court’s reasoning needs to be stated carefully. It did not decide that Liv’s waiver was automatically invalid under ERISA’s prohibition on assigning or transferring pension benefits. Instead, it concluded that the waiver did not require the administrator to pay someone other than the beneficiary identified under the plan.
The divorce decree and the beneficiary designation served different purposes. The waiver in the decree did not replace the steps required to change who received the payment from the SIP.
How does this connect to what a will controls?
In September, we looked at what a will actually controls. One of the main points was that some property passes through probate, while other property passes under a separate arrangement.
The Kennedy case shows why that distinction matters.
The SIP had its own rules for distributing benefits after William’s death. Under those rules, if there were no surviving spouse and no effective beneficiary designation, the benefits would be paid to the estate or distributed according to the executor’s directions.
But an effective beneficiary designation was still in place. Liv remained named, so the administrator paid her under the plan.
It is also important to recognize what this case was about. The Supreme Court was not deciding between two wills or whether a gift to Kari in William’s will should take priority. The dispute involved the divorce decree, the beneficiary designation, and the administrator’s responsibilities under federal law.
The connection to wills is that a person’s estate plan can involve several documents. Understanding the will is only part of understanding where the property will go.
What does this tell us about an executor’s authority?
We also discussed an executor’s responsibilities in September. One of those responsibilities is determining what property belongs to the estate.
Kari’s actions show how difficult that question can become. As executor, she requested the money for the estate and challenged DuPont’s decision when it paid Liv.
However, being appointed executor did not automatically give her authority to redirect the SIP benefits. The estate needed a legal basis for receiving the money, and the Court concluded that the administrator had properly followed the plan documents.
Before an executor can distribute property, they have to determine whether that property is actually payable to the estate. Kennedy provides an example of a dispute over that first step.
Did the Court decide Liv could keep the money?
The Supreme Court left an important question unanswered.
In footnote 10, it expressly declined to decide whether the estate could bring a claim against Liv to recover the benefits after DuPont paid them to her.
That means there is a difference between saying the administrator properly made the payment and saying the recipient could never be required to return it. The Court decided the administrator’s obligation. It did not resolve the possible recovery claim against Liv.
The ruling also should not be treated as the answer to every dispute involving a former spouse and a beneficiary designation. Different accounts, governing laws, plan terms, and court orders can affect the outcome.
What can we learn from the case?
The detail that stands out to me is that William changed the beneficiary of one plan but left the other unchanged. He had taken a step to name his daughter, but that change did not apply to both accounts.
This shows why reviewing each account individually matters. After a divorce or another major life change, someone should check who is currently listed as beneficiary and understand the procedures for making a change. Any divorce orders or restrictions should also be discussed with counsel.
Throughout September, we covered wills, probate, and executors. Kennedy brings those topics into an actual dispute and shows how the documents governing an individual asset can affect what happens after death.
For each asset, the question is: who is entitled to receive it, and what document or legal rule determines that answer?
Tyler ThompsonAuthor