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What happens when an alternate payee passes away?

by | Nov 30, 2017 | Division Of Pensions

A qualified domestic relations orders, or QRDO, stipulates that a pension plan has to be split between the participant and an alternate payee. This is done to divide pensions after a divorce.

For example, perhaps one spouse gets a pension of $2,000. Though every case is different and many factors have to be considered, for the sake of simplicity, the QRDO may simply state that the participant gets $1,000 per month and the alternate payee also gets $1,000.

An important question that has been raised in court, then, is what happens if the alternate payee passes away? Does the participant still just get $1,000 per month, the total ordered under the QRDO? Does the other half of the payment stop, or is it part of the other person’s estate?

One court case determined that the pension should revert to its original terms, meaning the participant in this example would get $2,000 per month once again. The reasoning is that the pension stipulates that the participant is supposed to get the full amount for life. It’s only split up after the fact by the QRDO, to provide for the alternate payee. If that person has passed away and no longer needs the money, those original terms should be restored.

Interestingly, the first court to see the case did not make this ruling, saying that the participant would still get just the divided payments, but the appellate court changed the ruling.

As you can see, a divorce case can have a long-lasting impact, and exactly how assets are divided can grow very complicated. It’s important for people to be sure they know their rights and legal options.

Source: FindLaw, “Pension Plan Ordered to Restore Full Benefits to Participant at Alternate Payee’s Death: Another Lesson in QDROs,” accessed Nov. 30, 2017