ESOP inheritance when beneficiary has died?
My sister died about five years ago. Her husband died within a year after her. He had two children from a prior marriage (my sister never adopted them). After her death, he had an attorney draft a will and arrange things so that her estate and life insurance went to him and then to his children.
Recently my parents were contacted by the benefits administrator of her former employer about her ESOP account. She never named a beneficiary. The administrator says that normally a spouse becomes the automatic beneficiary, but because her husband died before that designation became effective, their policy (under CT law) is to pay “next of kin,” which they say means my parents.
They apparently reached out to the husband’s estate attorney, but we have no documentation of that, only the ESOP distribution form.
Questions:
- Is it correct that my parents are the rightful heirs under CT law and the plan’s policy?
- Could the husband’s children (or his estate) contest this payout?
- Do my parents risk liability if they accept/cash the check?
- What documentation should they request from the benefits administrator before accepting payment?
The Retirement Equity Act gives the spouse the right to be the beneficiary of the account. The law of intestacy gives her husband the right to the first $100,000 of the intestate property, plus 3/4 of the balance; the parents inherit the remaining intestate property. You are asking good questions, but the answers are likely not simple, since there is more than one area of law involved, and will require a probate of her estate to find the final resolution.
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