[WSBAPT] CA life insurance & 401k

[John Creahan]

Mary,
I believe that ERISA will apply if the retirement account is a 401(k), as opposed to an IRA.
I agree with Eric that the 401(k) custodian may be obligated to pay the account over to the divorced spouse, but, if I recall correctly, that does not settle the issue - the intended beneficiaries may have a claim against the ex-wife to recover the proceeds. Of course, proving that the decedent wanted someone other than the ex to receive the account can be problematic, although the divorce decree will likely address the issue.
If the life insurance and retirement accounts were awarded to the decedent in the divorce, his children have a stronger argument.
Is the ex-wife the children's mother? If so, you may be able to get her to disclaim or place the proceeds in trust, which might be a better result than the children inheriting outright.
Hope this helps,
John

John Creahan
www.cairn-law.com<http://www.cairn-law.com/>
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From: wsbapt-bounces at lists.wsbarppt.com [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Mary Stone
Sent: Tuesday, January 17, 2017 12:04 PM
To: 'WSBA Probate & Trust Listserv' <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] CA life insurance & 401k


Thanks Eric.

Does anyone happen to know what the state law is in California, assuming ERISA doesn't apply?

Thanks.

Mary

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Tuesday, January 17, 2017 11:18 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com<mailto:wsbapt at lists.wsbarppt.com>>
Subject: Re: [WSBAPT] CA life insurance & 401k

Forgot to mention--this is a common problem, the conflict between ERISA and state law, and so sometimes the financial custodian and/or the life insurance company thought ahead, and the 401k terms of contract, or the life insurance policy, explicitly provide for an alternative beneficiary in the event a spouse is named and there is a subsequent divorce. So the actual policy and 401K contract terms should be reviewed to see if they provide for this circumstance. But if there is no such contract provision, if ERISA applies, it permits the custodian to completely ignore state law in favor of following the exact contractual designation of beneficiary.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

Please Note that We Have Moved. We have moved our Seattle office to Mount Baker Ridge (a small commercial community just above the I-90 tunnel). Our new address is 1417 31st Avenue South, Seattle WA 98144. All other contact information remains the same.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Eric Nelsen
Sent: Tuesday, January 17, 2017 10:55 AM
To: WSBA Probate & Trust Listserv
Subject: Re: [WSBAPT] CA life insurance & 401k

Depends on whether the life insurance and/or 401k were employment-based benefits. If they were, then ERISA controls (federal law, trumps any contrary state law) and the ex-wife gets everything. If they were purchased/funded independent of employment, then ERISA does not control and CA law might.

Sincerely,

Eric

Eric C. Nelsen
SAYRE LAW OFFICES, PLLC
1417 31st Ave South
Seattle WA  98144-3909
phone 206-625-0092
fax 206-625-9040

Please Note that We Have Moved. We have moved our Seattle office to Mount Baker Ridge (a small commercial community just above the I-90 tunnel). Our new address is 1417 31st Avenue South, Seattle WA 98144. All other contact information remains the same.

From: wsbapt-bounces at lists.wsbarppt.com<mailto:wsbapt-bounces at lists.wsbarppt.com> [mailto:wsbapt-bounces at lists.wsbarppt.com] On Behalf Of Mary Stone
Sent: Tuesday, January 17, 2017 10:30 AM
To: 'WSBA Probate & Trust Listserv'
Subject: [WSBAPT] CA life insurance & 401k

I have a friend whose 48 Y/O brother died unexpectedly on Christmas Eve, a resident of California. He was divorced with two children - one adult and one minor.  The friend says that her brother has life insurance and a 401k and it still names the ex-wife as the beneficiary.  Does that designation lapse after the divorce under CA or federal law?

Thank you.

Mary Stone
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