Posted by Nydia Streets of Streets Law in Florida Divorce

When parties divorce and their assets are separated by a Florida court, it is important to also remember to change beneficiary designation forms on retirement accounts and life insurance policies to conform to a divorce judgment. This is because a dispute can arise later if the retirement plan or insurer is bound by the beneficiary designation, and therefore must pay funds to an ex-spouse, even if this was not intended by the deceased ex-spouse. This was an issue in the case Martinez-Olson v. The Estate of Dan Olson, 3D20-1301 (Fla. 3d DCA September 1, 2021).

The parties were divorced in 2017. They entered a marital settlement agreement at that time in which stated in pertinent part: “Each party shall receive any and all benefits existing by reason of his or her past, present, or future employment or military service, including but not limited to any profit-sharing plan, retirement plan, Keogh plan, employee stock option plan, 401(k) plan, employee savings plan, military retired pay, accrued unpaid bonuses, or disability plan, whether matured or unmatured, accrued or unaccrued, vested or otherwise, together with all increases thereof, the proceeds therefrom and any other rights related thereto. The other party hereby waives and releases any and all claims or interest therein.” Another part of the agreement stated “Each party shall have exclusive ownership in all items of property that are currently in his or her possession or control, and the other party waives and releases any and all claim or interest in such items.”

The former husband died two years after the divorce was finalized. However, it appears he forgot to change the beneficiary designation on his retirement account. The former wife was therefore paid the beneficiary benefits because the former husband’s employer was bound to pay them to her under ERISA. The former husband’s adult daughter from another relationship then brought a suit against the former wife on behalf of the estate to enforce the marital settlement agreement and recover the beneficiary proceeds. The matter was referred to a general magistrate for hearing, and the magistrate concluded the former wife was entitled to keep the proceeds. The magistrate relied on case law indicating that unless there is a clear waiver in the marital settlement agreement of death benefits, the surviving ex-spouse does not waive them. The magistrate therefore recommended that the motion to enforce be denied.

The estate filed exceptions to the general magistrate’s report, and they were sustained by the trial court. The trial court found “[The former husband] did not intend, and [the former wife] did not expect, to have the proceeds of [The former husband’s] 401(k) plan transferred to [the former wife] upon [The former husband’s] death, as much as [the former wife] did not intend and [The former husband] did not expect to have the proceeds of [the former wife’s] 401(k) plan, if any, transferred to [The former husband] upon [the former wife’s] death. . . . . [I]n the present case, the [Agreement] specifically dictates who is to receive the proceeds of the 401(k) plan at issue. The [Agreement] provides under Article IX, ‘RETIREMENT’ that both [The former husband] and [the former wife], not only have exclusive ownership over their own 401(k) plans, but also the right to receive all increases thereof, proceeds therefrom and rights thereto.” The former wife was therefore ordered to turnover all funds paid from the retirement account to the former husband’s estate and she appealed.

The appellate court upheld the trial court’s decision, holding “Here, the plain language of paragraph 9.1 under the Agreement is specific enough to override the beneficiary designation form. The Agreement references the disputed 401(k) plan and the ‘proceeds therefrom.’ The Agreement further specifically and unequivocally provides that [the parties] ‘shall receive any and all benefits’ of his or her own 401(k) plan, including ‘all increases thereof, the proceeds therefrom and any other rights related thereto,’ of which the other party ‘waives and releases any and all claims or interest therein.’ This is not the general language, merely stating who is to receive ownership of the plan, disapproved of by the Supreme Court in Crawford. [. . .] The argument that the Agreement is not specific enough to override the beneficiary designation form because the words ‘death benefits’ were not used is unconvincing.”

Addressing another important issue in this case, the appellate court stated “The more pertinent question, which is one of first impression for this Court, is whether [the former husband’s] estate can bring this state law action against [the former wife], as the named beneficiary, to enforce a contractual waiver after distribution of the ERISA-governed 401(k) plan proceeds.” The court ultimately held “In line with MetLife, Kensinger, and other analogous decisions, the Estate asserts that ERISA does not preempt post-distribution suits against named beneficiaries to enforce a contractual waiver of plan proceeds. We agree and approve the growing body of case law supporting the Estate’s position that it can sue to recover the proceeds after they are distributed by the ERISA plan administrator pursuant to the plan documents.”

This is an interesting case that sheds light on the dispute that can arise when parties forget to update their beneficiary forms after divorce. Schedule a consultation with a Miami family law attorney to go over all the issues of which you should be aware in your Florida divorce.