Other Matters

Divorce and Beneficiary Designations

Keen v. Weaver, 121 S.W.3d 721 (Tex. 2003).


Husband named Wife as the beneficiary of his annuity plan which was governed by ERISA. Husband and Wife divorced. Wife waived any interest in the plan in the divorce settlement agreeing that the plan would be Husband’s sole property. Husband died 13 years after divorcing Wife without changing the beneficiary designation. Relying on the beneficiary designation, the annuity company began paying Wife. Husband’s Mother, the contingent beneficiary, claimed the proceeds. The trial court rejected Mother’s claim and held that Wife was entitled to the proceeds. The appellate court reversed holding that the Texas redesignation statute (Family Code § 9.302), although preempted by ERISA under Egelhoff v. Egelhoff, 121 S. Ct. 1322 (2001), applied as federal common law and thus prevented Wife, a former spouse, from receiving the annuity. Weaver v. Keen, 43 S.W.3d 537 (Tex. App.—Waco 2001).

The Texas Supreme Court affirmed the appellate court in a five to four decision but based its decision on the Wife’s waiver, not the redesignation statute. The court explained that ERISA does not prohibit a plan administrator from recognizing a beneficiary’s waiver, disclaimer, or other repudiation of plan benefits. Because Wife’s waiver of her interests in the plan was specific, knowing, and voluntary, the court deemed it to be enforceable under federal common law. According, the plan’s benefits are payable to Mother, the contingent beneficiary.

The four justice dissent explains that ERISA clearly preempts state law and that there is no basis to distinguish between the Texas redesignation statute and Wife’s waiver. The opinion explains that the majority “is unable to supply any reason, real or imagined, why ERISA would explicitly require plans to be administered according to their terms, preempt state law to assure that end, and then reincorporate state law into federal common law so that plans are not administered according to their terms, thereby making the express statutory language [of ERISA] simply illusory.”

Moral: Despite the holding in this case, designations of beneficiaries on plans governed by ERISA should be promptly changed upon divorce.

Prediction: This case, in my opinion, is likely to be appealed to the United States Supreme Court.

Comment: This decision reflects the court’s reluctance to conform with the law as pronounced by the United States Supreme Court when to do so would be contrary to Texas law and public policy. The United States Supreme Court indicated that plan administrators should not have to master the relevant laws of 50 states. The same logic would apply to how each state determines the contents of federal common law. Although the legal basis of the Texas court’s decision is problematic, it carries out the highly likely intent of Husband, albeit unexpressed, to not have annuity payments made to an ex-spouse from whom he had been divorced for 13 years. This issue is certain to arise repeatedly and should be addressed by an amendment to ERISA which expressly voids the designation of an ex-spouse which is made prior to divorce.