[WSBAPT] FW: Estate of Lundy v. Lundy (June 1, 2015, Div. 1 2015) - RE: [WSBA-Family-Law] Division I Opinion Sends Us All Back to Drafting Board/QDRO

Tue Jun 2 12:28:42 PDT 2015

Folks--New Division 1 case confirming that ERISA has some drastic effects on beneficiary payments from employment-based benefits (including life insurance paid for or subsidized by the employer, not just IRAs and 401ks) if an ex-spouse is left on the account as a beneficiary post-divorce. See below.

I think most of the rules were already in place, but this case summarizes nicely.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

From: Eric Nelsen
Sent: Tuesday, June 02, 2015 12:24 PM
To: 'WSBA-Family-Law at yahoogroups.com'
Subject: Estate of Lundy v. Lundy (June 1, 2015, Div. 1 2015) - RE: [WSBA-Family-Law] Division I Opinion Sends Us All Back to Drafting Board/QDRO

Dru--Thanks for posting this. The case is a great summary of the state of ERISA pre-emption of state law in the divorce context. Here's my takeaway:

1. If it's an employer-based benefit--life insurance, 401k, IRA, whatever, that is sponsored by the employer and contributed to or paid for by the employer--then Federal law controls (ERISA) and RCW 11.07.010 (that says beneficiary designations are revoked by divorce) has literally no effect. Remind your clients to review beneficiary designations and get them changed as soon as the divorce is final.

2. ERISA confirms that the plan administrator is entitled to pay according to their documents, and so distribute the benefits to the ex-spouse, regardless of state law. But end-runs around ERISA, by imposing a constructive trust or arguing unjust enrichment and trying to force the ex-spouse to disgorge the benefits after distribution, are also pre-empted by ERISA and forbidden.

3. It's still an open question as to whether a voluntary express waiver of ERISA rights by an ex-spouse in a divorce settlement agreement is enforceable. It's probably not enough to avoid distribution of benefits to the ex-spouse, but it might be enough to allow post-distribution collection via constructive trust or unjust enrichment. But best not to rely on this untested area, unless you're looking to do some appellate work. Include express waiver of ERISA rights language in settlement documents, so at least the option is available. Note, I think the only way to get such a waiver is in voluntary settlement. If the case goes to trial, I don't think a judge could impose an ERISA waiver on the spouses; they would have to separately agree to it to make it a voluntary express waiver.

My $0.02.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1320 University St
Seattle WA  98101-2837
phone 206-625-0092
fax 206-625-9040

From: WSBA-Family-Law at yahoogroups.com [mailto:WSBA-Family-Law at yahoogroups.com]
Sent: Tuesday, June 02, 2015 8:48 AM
To: WSBA-Family-Law
Subject: [WSBA-Family-Law] Division I Opinion Sends Us All Back to Drafting Board/QDRO

Hi Everyone. New case came down yesterday. Very important to review for understanding of  ERISA and the need to put in very detailed accurate waiver language in decrees etc if you want to make sure a former spouse is not the post dissolution beneficiary of insurance or retirement proceeds once the member dies if the member failed to change the beneficiary designation post dissolution (i.e. remove former spouse as the designated beneficiary).  This case provides limited guidance as to what kind of waiver language will "work" to keep the former spouse from receiving proceeds contrary to the decree. I believe this is a CLE worthy topic that will need to be presented soon . Meanwhile, discussion appropriate ?  See :

http://www.courts.wa.gov/opinions/?fa=opinions.disp&filename=719009MAJ

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