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Designated Beneficiary Trumps Divorce Decree


In Texas in 2001, William Kennedy quietly passed away. Since that time, things have been anything but quiet. Because Mr. Kennedy failed to update all of his financial paperwork and change the beneficiaries after his divorce, his daughter has been fighting to get her hands on $402,000 from his retirement account that she believes is rightfully hers.

Mr. Kennedy worked for DuPont Co. for 33 years and retired three years before his death. After he died, the company examined the form designating the beneficiary of his retirement account. On the form Mr. Kennedy had put his then-wife's name. When he divorced, he put off making the necessary changes to the form.

During their divorce, the former Mrs. Kennedy waived her right to the proceeds from Mr. Kennedy's retirement account; however, because Mr. Kennedy did not change the beneficiary before he died, DuPont made the check payable to her.

Kari Kennedy, the daughter of William and Liv Kennedy, says that her dad did not intend to give her mother another cent after their divorce was finalized in 1994. Kari, now 32, insists that Mr. Kennedy wanted her to inherit everything he had when he passed away.

After the money from Mr. Kennedy's retirement account was paid out to his ex-wife, Kari Kennedy's relationship with her mother was strained. Liv Kennedy returned to her native Norway where she died last year. She and Kari never agreed about Mr. Kennedy's retirement money.

According to a report by the Associated Press, Liv Kennedy filed for divorce after 22 years of marriage. In the divorce settlement she received cash, jewelry, furniture and a luxury vehicle. In return, she signed a waiver giving up all claims on Mr. Kennedy’s retirement account. Federal law dictates that employers follow their employees' wishes to the letter as reflected by their designations when paying out benefits. The law protects spouses from attempts made to cut them out of death and retirement benefits.

Although Liv Kennedy was no longer William Kennedy's wife, the divorce decree was not enough to override the fact that he still had her designated as the beneficiary of his account. Mr. Kennedy designated Kari Kennedy to handle his estate upon his death. She filed a lawsuit against DuPont for disregarding the divorce decree and paying Liv Kennedy the proceeds of the retirement account. A federal judge found the waiver Liv Kennedy signed during the divorce settlement valid. DuPont was then ordered to pay $402,000 to Mr. Kennedy's estate.

DuPont appealed the decision and the Fifth U.S. Circuit Court of Appeals, based in New Orleans, ruled in favor of DuPont. The appeals panel decided DuPont was right to pay Liv Kennedy the proceeds of Mr. Kennedy's retirement account because she was the beneficiary listed.

Kari Kennedy appealed to the U.S. Supreme Court. Although the justices seemed to be sympathetic about the situation, they found that there was no way of knowing exactly what Mr. Kennedy had intended. Since he did not change the beneficiary, the court found that his intentions were for Liv Kennedy to receive the money, despite the divorce agreement.

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