The Risk Manager, Spring 2001
- Maryland:
The wife agreed in a divorce settlement that all the personal property then in the husband’s possession was his. The husband remarried, but failed to change the beneficiary of his IRA from his former wife to his new wife.
When the husband died the new wife claimed the former wife had waived any claim of the IRA. The court held that at the time of the divorce settlement the former wife did not have a property interest in the IRA to waive, but only an expectancy interest.
A general personal property waiver does not waive an expectancy interest.
The new wife lost.
Maryland Court of Appeals. Paine Webber Inc. v. East, No. 44, September Term, 2000.
3/14/01.
Risk Management Lesson:
Specifically identify in the settlement agreement all financial assets to be divided or retained by the parties.
Urge clients to promptly change beneficiaries of pension plans, insurance policies, and other financial assets upon divorce and document that this advice was given.
- Tennessee:
A former wife claimed a share of the husband’s disability benefits of $8,000 per month even though payments started after the divorce.
She claimed a share because the disability policies premiums were paid from marital assets and the husband became disabled during the marriage.
The court held that disability benefits are personal to the injured person and are not marital property.
The former wife lost.
Tennessee Supreme Court. Gragg v. Gragg, No. W1998-00734-SC-R11-CV. 1/31/01.
Risk Management Lesson:
Cover all significant financial issues, current and contingent, in the divorce settlement agreement.
- Federal:
In spite of a Washington statute that revokes beneficiary designations after a divorce the ex-wife of a deceased husband got his pension and insurance – children by a former marriage were left out in the cold.
The husband failed to change the beneficiaries on either asset before his death.
Both were found to be part of an ERISA plan.
The US Supreme Court ruled that ERISA pre-empts the state beneficiary revocation statute thus entitling the former wife to the pension and insurance.
Egelhoff v. Egelhoff, No. 99-1529,3/21/01.
Risk Management Lesson:
Lawyers must determine whether a divorce client has an ERISA plan with a designated beneficiary and advise accordingly.
In a divorce action it is best to get a QDRO covering all pension plans approved before the divorce is complete.
Document the file!