Imagine this scenario: you get married and you and your spouse both have children from a previous marriage. You end up getting a divorce. As part of the divorce decree the order states your former spouse has no right to your retirement assets. You think you are safe and a few years later you die. However, you never changed the beneficiary of your 401k plan and now your spouse has filed a claim and the plan administrator pays out the benefits to your former spouse. Your children get nothing.
What can your children do? Maybe there is nothing the children can do. In Kennedy v. Plan Administrator et al. 555 U.S. 285 (2009), the U.S. Supreme Court faced a very similar situation. The court held that basically that the plan administrator was correct in following the terms of the plan as stated in the plan documents. Thus, if you have retirement plan assets, then you need to make sure the beneficiary designation properly states who you want the assets to go to especially after a divorce. For more information contact Cody & Linde, PLLC