Why did Leonard Dobens leave his life insurance to his Ex-Wife?
Hint: He probably didn’t mean to!
In Concord, New Hampshire this month, U.S. District Court Joseph N. Laplante ruled that Leonard Dobens’ children could not defeat his ex-wife’s claim for his employer-sponsored life insurance policy under ERISA, the Employee Retirement Security Act of 1974.
Dobens named his then-wife, Kathleen O’Connor, as the beneficiary of the life insurance policy in 2002. The couple was divorced in 2004, with the divorce decree specifying that “[e]ach party is awarded all policies of life insurance standing in his/her own name…” Dobens never contacted the New York Life subsidiary to change his beneficiary designation, though. Watch my five-minute video here to find out why this was a mistake.
Dobens died in 2014. His daughter, as administrator of his estate, sought to collect on the policy, which was when she discovered that O’Connor was still the named beneficiary.
ERISA, like many federal laws, “pre-empts” (trumps, defeats, overrules) contrary state laws – like divorce and probate laws – that “relate to any employee benefit plan.” It does NOT pre-empt state laws that “affect employee benefit plans in [a] tenuous, remote or peripheral… manner…” Judge Laplante, quoting the First Circuit Court of Appeals, noted that “[d]rawing the line between those state laws that ‘relate to’ ERISA-regulated plans, and those that are only ‘tenuous, remote or peripheral’ has proven considerably difficult in practice, producing an ‘avalanche of litigation.’ ”
What does this mean for you in thinking about your own estate? You need to consider every asset you own – including benefits provided by your employer – and be sure you know to whom it will pass, and how, after your death. This is why our new-client intake process is extremely thorough – we ask you to provide a statement for each and every bank and brokerage account, insurance policy, retirement account, and employer-sponsored plan benefit at the outset, so mistakes like this don’t happen.
If you have questions about life insurance, retirement accounts, or beneficiary designations, email me.