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Estate of Lundy v. Lundy

Court of Appeals of Washington, Division 1

June 1, 2015

The Estate of Craig S. Lundy, Respondent ,
v.
Kelly Lundy, Appellant

Oral Argument April 20, 2015

Appeal from Snohomish Superior Court. Docket No: 14-4-00306-0. Judge signing: Honorable Eric Z Lucas. Judgment or order under review. Date filed: 04/02/2014.

J. Bruce Smith (of Barron Smith Daugert PLLC ); and Philip J. Buri (of Buri Funston Mumford PLLC ), for appellant.

Perry W. McConnell (of Hansen McConnell & Pellegrini ), for respondent.

Authored by Marlin Appelwick. Concurring: Ronald Cox, J. Robert Leach.

OPINION

Appelwick, J.

[187 Wn.App. 950] [¶1] -- The trial court allowed the Estate to recover Employment Retirement Income Security

Page 210

Act of 1974 (ERISA)[1] benefits after they had been distributed to the designated beneficiary, his former wife, Kelly. The Estate relied on the couple's dissolution decree and RCW 11.07.010 to assert that Kelly waived her right to the proceeds. ERISA preempts all claims to funds based on state law. The evidence is insufficient to establish that Kelly waived by agreement with Craig the right to receive the proceeds of the ERISA beneficiary designation. We reverse.

FACTS

[¶2] Craig and Kelly Lundy[2] married in 1984. For most of his career, Craig worked as a machinist at The Boeing Company. Kelly worked for the Northwest Network of PeaceHealth Inc., a large health care organization. Both had retirement accounts with their employers and named each other as the beneficiaries of those accounts. The couple did not have children.

[¶3] Craig and Kelly divorced in 2009. The dissolution decree " awarded [to Craig] as his separate property ... [a]ll retirement funds and 401Ks in his name." It also " awarded [to Kelly] as her separate property ... [a]ll retirement funds [187 Wn.App. 951] and 401Ks in her name." Neither changed the beneficiary of their retirement account after the divorce.

[¶4] Craig died on August 4, 2013, intestate and without issue. His sister was appointed personal representative of his " Estate."

[¶5] At the time of his death, Craig's retirement account was valued at $497,435.77. The account was controlled by ERISA, a federal scheme for regulating employee benefit plans. Kelly was listed as the beneficiary of the account.

[¶6] On March 3, 2014, the Estate petitioned for recovery of the retirement account from Kelly. The Estate cited RCW 11.07.010(2)(a), which provides that the designation of a spouse as beneficiary of a nonprobate asset is automatically revoked upon dissolution of the marriage. The Estate argued that the trial court should incorporate RCW 11.07.010 into the dissolution decree to find waiver of Kelly's interest in the retirement account. Kelly responded that RCW 11.07.010 was preempted by ERISA and thus did not apply to Craig's retirement account. The trial court ruled in favor of the Estate.

[¶7] Kelly appeals.

DISCUSSION

[¶8] Kelly argues that the trial court erred in granting the Estate's petition to recover the retirement account, because ERISA preempts the Estate's state law claims to the account.[3] The Estate acknowledges that, under ERISA, the plan administrator properly distributed the funds to Kelly. However, the Estate challenges Kelly's postdistribution [187 Wn.App. 952] retention of the funds. The Estate asserts that the language of the dissolution decree, coupled with the presumption of ...


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