In 1994, William Kennedy drove to a Texas courthouse, signed the papers, and walked away from his marriage to Liv Kennedy. The divorce decree was thorough. Among other provisions, it stated that Liv waived all right, title, and interest to William's retirement savings through his employer, E.I. du Pont de Nemours and Company.
It seemed airtight. The judge signed it. Both parties agreed. Texas had spoken.
But William Kennedy never called DuPont's HR department. He never submitted a new beneficiary form. The slip of paper naming Liv as the sole beneficiary of his Savings and Investment Plan — the one he had filled out in 1974, the year they married — sat in a file somewhere, unchanged, gathering no particular attention.
William retired in 1998. He died in 2001. His estate, represented by his daughter Kari, contacted DuPont to claim approximately $400,000 in retirement savings. DuPont reviewed its records, found the 1974 beneficiary form, and cut a check — to Liv.
Kari sued. The case wound through the federal courts and reached the United States Supreme Court. In January 2009, the Court ruled unanimously in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285: DuPont was right.
The waiver in the Texas divorce decree didn't matter. The signed judgment didn't matter. What mattered was the beneficiary designation form on file with the plan — and it named Liv. Under federal law, that was that.
Why Texas Family Law Couldn't Save William Kennedy's Daughter
Most Texans going through a divorce assume the law has their back. And in many important ways, it does. Texas Estates Code § 123.001 automatically voids any provision in a will that leaves property to a former spouse the moment the divorce is final. Your will doesn't need to be rewritten; the legislature essentially rewrites it for you, reading it as if your ex-spouse died before you did. Texas Estates Code § 123.052 does the same for powers of attorney — if you named your spouse as your financial agent or healthcare proxy, that authority evaporates when the divorce decree is signed.
For many non-ERISA accounts — individual bank accounts with payable-on-death designations, brokerage accounts with transfer-on-death forms — Texas Family Code § 9.301 provides automatic protection as well, voiding a former spouse's beneficiary designation on certain financial accounts once the divorce is final.
So Texas is looking out for you. It just isn't looking out for you everywhere that counts most.
The ERISA Exception That Swallows the Rule
The Employee Retirement Income Security Act of 1974 — ERISA — is a federal law that governs most employer-sponsored retirement plans: 401(k)s, 403(b)s, pension plans, profit-sharing plans, and most group life insurance policies. Congress passed it to ensure that workers' retirement benefits are protected and consistently administered across the country. That consistency comes at a cost: federal law preempts state law on every question ERISA answers.
And ERISA has a clear answer on beneficiary designations. Plan administrators are required to follow the plan documents — including the beneficiary designation form on file. They are not required to consult divorce decrees, court orders, or Texas Family Code provisions. If the form says Liv Kennedy, the plan pays Liv Kennedy. Full stop.
The Supreme Court has confirmed this principle twice. In Egelhoff v. Egelhoff, 532 U.S. 141 (2001), the Court struck down a Washington state law that automatically revoked an ex-spouse's beneficiary status for ERISA plans. Texas's similar protections face the same ceiling.
This gap catches more Texas families than most people realize. A 401(k) is often the largest single asset in an estate — larger than the house, larger than bank accounts combined. For many middle-class Texas families, a retirement account represents decades of savings. And it can flow directly to a former spouse, against the explicit wishes of both parties to the divorce, because a single form was never updated.
It's Not Just Retirement Accounts
The ERISA problem is the most dramatic, but it isn't the only post-divorce estate planning gap that trips up Texans.
Group life insurance through an employer is typically an ERISA-governed benefit, which means the same rule applies: the plan pays whoever is named on the beneficiary form, regardless of the divorce. A $500,000 group term life policy through your employer will pay your ex-wife if her name is still on the form.
Individual life insurance policies are a different story — they're governed by Texas law, and Texas Insurance Code protections may apply. But "may apply" is not "will apply," and the safer path is always to update the form directly.
IRAs — traditional, Roth, SEP — are not ERISA plans. They are individual accounts governed by state law and IRS rules. Texas law provides more protection here. But the IRA custodian (Fidelity, Vanguard, Schwab) will look at the beneficiary form on file, and a dispute over who should have received the funds is expensive litigation that your family should never have to face.
Revocable living trusts require a formal amendment to remove a former spouse as trustee or beneficiary. A divorce does not automatically alter trust documents.
The Seven Things You Must Update After a Texas Divorce
There is no single form, no single call, no magic document that covers all of this at once. Post-divorce estate planning is a checklist. Here is what that checklist looks like:
- Employer retirement plan beneficiary form (401(k), 403(b), pension): Contact HR or the plan administrator directly. Submit a new beneficiary designation form. Do not assume the divorce decree is sufficient. It is not.
- IRA beneficiary designations: Log into your IRA custodian account or call them. Update the primary and contingent beneficiary on every IRA you own.
- Group life insurance through your employer: Same process as the 401(k). HR or your benefits portal. New form.
- Individual life insurance policies: Contact each insurance carrier. Request and submit beneficiary change forms for every policy.
- Your will: Texas law voids gifts to an ex-spouse automatically, but your will still references them by name and may name them as executor or guardian. Have a new will drafted that reflects your current wishes and names the right people in every role.
- Powers of attorney (financial and medical): Your ex-spouse is automatically removed as agent under Texas law. But you now have no agent unless you execute new documents. A new Durable Power of Attorney and Medical Power of Attorney are essential — without them, if you are incapacitated, your family may need a court-ordered guardianship to manage your affairs.
- Bank and brokerage account TOD/POD designations: Review and update payable-on-death and transfer-on-death designations at every financial institution. These pass outside of probate and outside of your will — they go to whoever is named on the form.
The Remarriage Trap
Divorce triggers the update checklist. But remarriage creates a second, equally serious problem that fewer people anticipate.
In Texas, if you marry without updating your estate plan, your new spouse may have community property rights in assets you accumulated during the new marriage — regardless of what your will says. If you have children from a prior marriage, a mismatch between your will and your beneficiary designations can leave your new spouse and your children fighting over your estate.
Blended-family estate planning is one of the most complex areas of Texas estate law. Simply updating a will is rarely sufficient. Revocable trusts, carefully drafted spousal provisions, and explicit beneficiary planning across every account are often necessary to ensure that what you intend — protecting your children from a prior marriage while providing for a new spouse — actually happens.
What William Kennedy Should Have Done
One phone call to DuPont's benefits office. One form. Fifteen minutes.
That is the distance between Kari Kennedy inheriting her father's retirement savings and spending years in federal court watching them go to her mother instead.
The Kennedy case is not an obscure cautionary tale from a distant jurisdiction. It began in a Texas courthouse, just like thousands of divorces finalized in Collin County, Denton County, and Tarrant County every year. The people it affected were ordinary Texans who trusted that signing the decree meant the job was done.
The job was not done. And for many North Texas families going through a divorce right now, it isn't done either.
When to Do This — and Who to Call
The best time to audit your estate plan is immediately after a divorce is final — ideally within 30 days. The second-best time is before the divorce is final, so the decree itself can address plan beneficiary issues where possible. A Qualified Domestic Relations Order (QDRO) can divide an ERISA plan between spouses as part of the divorce settlement; without one, the only option is to update the form yourself after the fact.
At WG Law, Carla Alston brings 39 years of legal practice and an LL.M. in Taxation from NYU School of Law to Texas estate planning and uncontested divorce matters. She has lived the consequences of inadequate estate planning firsthand — as the mother of a special-needs adult son and as a widow who discovered the gaps in her own family's plan. She does not do this work from a textbook.
If you are navigating a divorce — or if you finalized one years ago and have never updated your beneficiary designations — WG Law's estate planning team can conduct a complete post-divorce estate plan audit. We serve clients in McKinney, Southlake, Frisco, Plano, Allen, and across the greater DFW metroplex. Call us at 214-250-4407 or request a consultation.
This article is for general informational purposes only and does not constitute legal advice. Estate planning and divorce law are fact-specific. The information here may not apply to your situation. Please consult a qualified Texas attorney before making any decisions about your estate plan or divorce proceedings.