What happens if the plan participant dies after the parties are divorced but the QDRO hasn't been drafted yet?

By Carolyn Grimes
November 14, 2016

What happens is a lot of bad things, essentially. This is a huge problem in divorce laws. It impacts in the QDRO areas and it often impacts in life insurance because people are often ordered to rename their ex-spouse or the children as beneficiaries of life insurance after divorce and they don't do it. They either just name the new spouse or they totally forget about it. There's a lot of litigation in this area.

Here's a very odd Virginia case that popped up recently where the parties didn't finish the QDRO for 17 years after the divorce and the ex-husband died. He was remarried to someone else, so his new wife is his beneficiary under federal law, and she said, “No I get that money.” They had a very unusual term in their agreement that the retirement benefits will go to the children – not the ex-spouse – which is odd. I really recommend against that.

The ex-wife got the court to enter the QDRO, even though the husband was dead, submitted to the plan and the plan basically kicked it back and said, “I can't pay this. I don't know what you want me to do. I have a current wife.”

That resulted in a court case where a Virginia court of appeals decision said you could enter, basically, a posthumous QDRO under a very odd quirk of the law because it was a 401(k) plan, not a pension, but that case has also gone now to the Federal Circuit. The Federal Circuit has said, “No, you can't do that.” The key moral of this story is get the QDROs entered as soon as you get divorced. Get them to the plan administrator immediately, because the longer you wait the greater the chance you have of something bizarre happening. Then it takes a lot of litigation to try to unwind it, but you may not be able to.

Carolyn Grimes is a family lawyer at the law firm of Wade Grimes Friedman Sutter & Leischner PLLC in Alexandria, Virginia. To learn more about Grimes and her firm, visit www.oldtownlawyers.com.

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November 14, 2016
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