The Associated Press

Tue, Oct 7, 2008 (3:15 p.m.)

If William Kennedy had updated all his financial paperwork in accordance with his divorce decree, chances are his daughter would not have been at the Supreme Court on Tuesday fighting for the $402,000 she thinks should be hers.

When Kennedy died in Texas in 2001, his employer, DuPont Co., looked at the form on which he designated the beneficiary of his retirement account and saw the name of his ex-wife, Liv.

So, despite divorce papers in which she waived her right to the proceeds from that account and over the objection of her daughter Kari, DuPont paid Liv Kennedy the money.

"My father expressly did not want my mother to have another red cent after their divorce was final" in 1994, Kari Kennedy said in an interview. "There's no doubt in my mind that he wanted me to have everything he had."

Kari Kennedy, 32, is a social worker who lives in Lumberton, Texas, with her husband and two children.

Her mother sought the divorce and received money, jewelry, furniture and an 11-year-old Mercedes Benz. The Kennedys were married 22 years. William Kennedy worked for DuPont for 34 years and died three years after he retired.

The dispute over his retirement money ruptured the relationship between mother and daughter, Kennedy said. "I did reconcile with her, but we never agreed on this point," she said. Liv Kennedy returned to her native Norway shortly after the divorce and died there last year.

Not for nothing do financial planners and advice columnists urge people to keep their beneficiary designations up to date.

The main federal law on employee benefits requires companies to follow strictly their workers' wishes as reflected in their designations. Spouses are protected from attempts to cut them out of death and retirement benefits.

Divorce papers, by themselves, aren't always enough to override the earlier designation of a beneficiary.

That is the situation DuPont said it encountered when trying to determine whom to pay after William Kennedy's death. "Marital dissolution comes up all the time," said Mark Levy, DuPont's lawyers. "Congress wanted bright-line rules that could be easily applied."

Kari Kennedy, designated by her father to handle his estate upon his death, sued DuPont and a federal judge found that the waiver Liv Kennedy signed as part of the divorce meant what it said and ordered DuPont to pay William Kennedy's estate $402,000.

The 5th U.S. Circuit Court of Appeals, based in New Orleans, disagreed with the judge and said DuPont correctly gave the retirement savings to Liv Kennedy because she remained her ex-husband's designated beneficiary.

The justices appeared sympathetic to Kari Kennedy, but also concerned about tinkering with the rules.

DuPont's retirement plan says "that if you want to change the beneficiary, here's how you've got to change the beneficiary," Chief Justice John Roberts said.

"We just have no way of knowing" what William Kennedy intended, Justice Ruth Bader Ginsburg said.

Kari Kennedy said her father made his intentions clear. But she agreed that if he had updated all his forms, "we wouldn't be here."

The case is Kennedy v. Plan Administrator, 07-636.