November 2007 Vol. 106 No. 2 THE REVIEW

Divorcees Turn About in Their Graves as Ex-Spouses Cash In: Codified Constructive Trusts Ensure an Equitable Result Regarding ERISA-Governed Employee Benefit Plans

Sarabeth A. Rayho

A revocation-by-divorce statute essentially nullifies a devise in a divorced decedent’s will when the devise bequeaths property to the decedent’s ex-spouse and the will was executed during their marriage. Until recently, state revocation-by-divorce statutes unquestionably applied not only to wills but also to will substitutes, including ERISA-governed employee benefit plans. In 2001, the Supreme Court held in Egelhoff v. Egelhoff ex rel. Breiner that ERISA preempts traditional state revocation-by-divorce statutes as applied to ERISA-governed employee benefit plans. In the wake of the Egelhoff decision, plan administrators may automatically pay proceeds to the listed beneficiary, even an ex-spouse, regardless of the existence of a traditional state revocation-by-divorce statute. One solution to this preemption is the use of a constructive trust. Uniform Probate Code section 2-804(h)(2) imposes a constructive trust against an ex-spouse when the ex-spouse receives proceeds from an employee benefit plan because ERISA preempts a state revocation- by-divorce statute. The constructive trust is in favor of those persons who would take if the corresponding state revocation-by-divorce law were not preempted. This Note argues that state statutory constructive trusts adopting Uniform Probate Code section 2-804(h)(2) can resurrect the revocation-by-divorce doctrine as applied to ERISA-governed employee benefit plans. In doing so, constructive trusts would achieve an equitable result consistent with the law’s treatment of other will substitutes as well as wills themselves. The Note begins by discussing the revocation-by-divorce doctrine and ERISA jurisprudence and explains how ERISA intertwines with traditional revocation-by-divorce statutes. The Note then reviews currently suggested methods to harmonize ERISA-governed employee benefit plans with the treatment of other willsubstitutes and contends that those proposals are inadequate because they undermine ERISA’s goals. The Note concludes that state constructive trust statutes will avoid ERISA preemption while also furthering ERISA’s goals.

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