Can your ex still collect your 401(k) or life insurance?

Often, yes. A retirement plan or life insurance policy pays whoever is named on its beneficiary form. If that is still your former spouse, a divorce decree that says otherwise may not change who gets paid. The Supreme Court has confirmed this for employer plans and for federal employees’ life insurance.

The DuPont case

William Kennedy worked for DuPont. He and Liv married in 1971. In 1974 he put her name on the beneficiary form for his company savings plan. When they divorced in 1994, the decree had Liv waive her rights to his retirement benefits, and a judge signed off on it.

William never changed the form at DuPont. When he died in 2001 the account was worth about $400,000. His daughter Kari, as executor, asked the plan to pay his estate and pointed to Liv’s waiver. The administrator looked at its own form, saw Liv’s name, and sent her the money.

The estate took the plan to court, and in 2009 a unanimous Supreme Court sided with the plan. Federal law directs plan administrators to follow the plan documents. The plan documents named Liv. If administrators had to weigh divorce decrees against their own forms, every plan would be in the business of interpreting state court orders, and the Court chose the simpler rule.

Everyone agreed that William had not meant Liv to get the money. Liv had signed the waiver herself. The result turned on a form signed in 1974.

State laws that cancel an ex, and their limits

Some states have statutes providing that a divorce automatically revokes a former spouse’s designation as beneficiary. Whether one helps you depends on where the account came from.

David Egelhoff’s divorce became final in April 1994, and he died two months afterward. His ex-wife, Donna, was still the named beneficiary on his employer-provided life insurance and pension. Washington had a statute revoking such designations on divorce. The Supreme Court ruled in 2001 that for employer plans, federal law displaces a statute like that. Donna was paid.

In 1996 Warren Hillman, a federal employee, listed his wife, Judy, on his government life insurance. The two divorced two years later. In 2002 he married Jacqueline, and when he died in 2008 the form still read Judy. Virginia law allowed a widow in Jacqueline’s position to sue the former spouse for the proceeds. The Supreme Court decided in 2013 that the federal program’s rules displace Virginia’s. Judy kept $124,558. Jacqueline, married to him for six years, received none of it.

Mark Sveen died in 2011 with his former wife still named on a life insurance policy that wasn’t tied to an employer. Minnesota’s revocation statute applied to that policy. After the Supreme Court decided the case in 2018, his children received the money.

Each of these men left an old form in place. Whether a state statute came to the rescue depended on whether federal law governed the account.

The fifteen-minute check

In the Kennedy case, one updated form would have settled the matter. Checking yours takes about fifteen minutes.

1. List every account that pays a named beneficiary. Include retirement plans from current and former employers, IRAs, life insurance (including any policy that came free with a job), annuities, and bank or brokerage accounts with a payable-on-death or transfer-on-death designation.
2. Log in to each one and read who is named on the screen. Don’t rely on memory. Take a screenshot.
3. Make sure each account has a backup (contingent) beneficiary as well as a primary one.
4. Pay special attention to plans from jobs you left years ago. You have probably thought about those forms least.
5. If you’re married, show each other the screenshots.
6. Set a reminder on your anniversary to repeat the check every year.

If you divorce, change the forms yourself rather than counting on the decree. Article 10 of the default contract sets out the other federal terms that come with a marriage, and your state’s page covers the state side.

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