He Divorced in 1994 and Never Changed the 401(k) Beneficiary Form. When He Dies, His Ex-Wife Will Get the $402,000, Not His Daughter. The Supreme Court Already Said So

He divorced in 1994. The order split the house, the cars and the savings. His ex-wife signed away any claim to his workplace retirement plan. He kept working and kept contributing, and the 401(k) now holds $402,000.

His daughter knows that number. She has heard him say the account goes to her, and she assumes the divorce papers and his will settle the question. The beneficiary form he filed as a newlywed still names his ex-wife. He never replaced it.

When he dies, the plan administrator will pull that form and pay the ex-wife. The daughter will be holding a divorce decree that changes nothing.

Plan Administrators Pay the Name on the Form

A 401(k) is governed by the Employee Retirement Income Security Act of 1974, known as ERISA. The statute requires administrators to manage a plan “in accordance with the documents and instruments governing” it, under 29 U.S.C. §1104(a)(1)(D). The beneficiary designation is one of those documents.

The Supreme Court applied that rule to nearly this exact family in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, decided January 26, 2009. William Kennedy named his wife, Liv, as beneficiary of his DuPont savings plan. Their divorce decree stripped her of her interest in the plan, but he never signed a document removing her. After he died, his daughter, serving as executor, asked for the money to go to the estate. The plan administrator relied on the designation form and paid Liv.

The Court found unanimously that the administrator acted properly by following the plan documents.

A Divorce Decree Leaves the Old Form in Charge

This is the detail that blindsides families. The Court accepted that Liv’s waiver was valid under ERISA’s anti-alienation rule. She still collected, because the plan was entitled to pay by its own paperwork. As one benefits law firm summed up it, “external papers such as divorce decrees or property settlements cannot contradict beneficiary designations on file” with the plan.

ERISA does carve out one type of court order: a qualified domestic relations order, or QDRO. The Kennedy decree did not qualify, so DuPont treated the divorce as if there had been no order.

A second case closes the remaining escape route. In 2001, in Egelhoff v. Egelhoff, the Court held that ERISA preempts state revocation-by-divorce statutes as applied to ERISA-governed employee benefit plans. Washington had a law that automatically canceled an ex-spouse’s designation after divorce. It could not reach the employer plan.

An IRA With the Same Stale Form Can Land Differently

An individual IRA sits outside ERISA. IRS guidance describes the beneficiary as “any person or entity the owner chooses to receive the benefits of the IRA after the owner dies”, and with no federal preemption in the way, state law gets a say.

Several states have revocation-on-divorce statutes. In 2018, in Sveen v. Melin, the Court upheld Minnesota’s version as applied to a life insurance policy, finding it did not substantially impair preexisting contractual relationships. Advocates in that case argued such laws properly take ex-spouses off insurance policies and IRAs automatically.

So the same stale form can produce two results. Inside the 401(k), the ex-wife collects. Roll that money into an IRA in a state with a revocation statute, and the old designation can fall away. Those statutes vary, and some states have none, so the IRA still needs its own updated form.

Fixing It Takes One Form and One Confirmation

Every repair runs through the plan administrator, because nothing else counts.

• File a new designation directly with the plan. Use the administrator’s own form or benefits portal. Name the daughter as primary beneficiary and add a contingent. A will has no power over this account.
• Get proof the plan has it. Ask for written confirmation or a printout of the beneficiary currently on record. The Kennedy estate lost on what the plan’s file said.
• Repeat for every other account. Each IRA, life insurance policy and TOD or POD account has its own form and its own rules.
• Account for a current spouse. If he remarries, the new wife is generally the automatic beneficiary of a 401(k). Naming the daughter instead requires written spousal consent, which federal rules require to be witnessed by a notary or plan representative. Without her signature, the daughter cannot be named alone.
• Anyone divorcing now: require a QDRO or a new beneficiary filing as part of the settlement, before the order is final.

An estate attorney can confirm how his state handles any IRAs and insurance he holds.

The figure to remember is $402,000, and a single page signed before the 1994 divorce decides who gets it. Two Supreme Court decisions have already settled that the page beats the order.

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