In Lynn Martinez-Olson v Estate of Dan Olson, Lynn Martinez-Olson (“Lynn”) divorced Dan (“Decedent”) in 2017. As part of the marital settlement agreement (the “Agreement”), each party agreed that they would receive all benefits existing by reason of their employment included but not limited to “profit-sharing plan, retirement plan, Keogh plan,… 401 (k) plan, employee savings plan,… 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 of interest therein. (emphasis added)” .
Decedent did not change his 401(k)beneficiary after the dissolution of marriage. Thus, at his death, Lynn remained the beneficiary. Lynn and Decedent’s daughter, Chelsea made competing claims to the 401(k) and the company ultimately distributed the 401(k) monies to Lynn in accordance with the beneficiary designation and in accordance with federal law.
While federal law compelled the distribution to Lynn, Chelsea argued that such distribution did not prevent Chelsea from bring a post distribution action to enforce the contractual waiver in the Agreement and to recover the plan proceeds. Chelsea then brought an action to require Lynn to turn over the proceeds to Decedent’s estate or to his 4 living adult children.
Lynn argued that, because the Agreement did not specifically refer to the “death benefits”, she did not waive such interest in the death benefits. The general magistrate agreed with Lynn that the Agreement did NOT override the 401(k) plan beneficiary designation and Lynn was the proper beneficiary.
Chelsea, as personal representative of the Estate, disagreed with the magistrate report and argued that Florida’s revocation on divorce statute would provide the legal mechanism to automatically revoke Lynn’s beneficiary designation.
The trial court determined that the language in the Agreement was clear in that Lynn was not entitled to the PROCEEDS therefrom and ordered Lynn to turn over all proceeds to the Estate. Lynn appealed.
The appellate court looked at the plain language of the Agreement and agreed with the trial court that the Agreement clearly mentioned Decedent’s 401(k) plan, cited to a Florida Supreme Court case, and determined that the question is “whether the language in the settlement agreement is specific enough to override the predissolution beneficiary”.
As the appellate court stated “[h]ere the plain language of paragraph 9.1 under the Agreement is specific enough to override the beneficiary designation form.” Just because the Agreement did not use the term “death benefits” was not enough to argue the language in the Agreement was not specific. ” ‘[M]agic words are not required’ in a marital settlement agreement in order to specify who is to receive the proceeds or benefit’s of a policy, plan or account.”
Because the language in the Agreement was specific as to the proceeds of the 401(k) plan, the court did not have to “delve into statutory interpretation or venture into the thicket of ERISA preemption” and did not express any view as to the validity of the application of the revocation -on-divorce Florida Statute.
The court also cited an Eleventh Circuit decision in finding that, while “a party who is not a named beneficiary of an ERISA plan may not sue the plan for any plan benefits,” … that party may sue the plan beneficiary to recover those benefits “but only after the plan beneficiary has received the benefits”. The appellate court agreed with Eleventh Court decision and determined that the estate could sue to recover the proceeds from Lynn after the proceeds were distributed by the ERISA plan administrator.
ADVICE: Yet another reminder to those lawyers who draft prenuptial or postnuptial agreements. Be very specific as to the parties decision on retirement proceeds. Also, if you represent the parties after divorce, then remind them to change their beneficiary designations to reflect to whom they want the proceeds to be distributed.
WORD OF THE WEEK: Magistrates are appointed by circuit judges to handle cases. Qualified applicants must be a member in good standing in The Florida Bar for at least five years immediately preceding employment and have at least one year of practice in at least one of the primary areas of assignment. They work directly under the circuit judges, running their courtroom just like a judge. In family law cases, magistrates hear divorces, modification cases, and paternity cases. General magistrates are needed in Florida’s trial courts to assist the judiciary for timely disposition of cases and they hear cases and make findings of fact and recommendations in a General Magistrate’s Report to judges in the Family, Circuit Civil, Juvenile and Probate Divisions. Once the general magistrate has filed a report with the sitting judge, either party in the case may appeal by making exceptions to the general magistrate’s findings and recommendations. If there are no exceptions to the report, then the judge generally enters an order approving the decision of the general magistrate.
GENEROSITY IS A KEY TO HAPPINESS …REACH OUT AND HELP SOMEONE TODAY!