In re Estate of Ernest J. Lager, Deceased, ___Mich App___ (2009), #276843, 11/3/09
Return to Probate Review MenuIn 1992 Ernest designated Eric as primary beneficiary of his personal savings plan (PSP). At the time Ernest was unmarried. He married Georgia in 1997. Ernest died intestate in 2005. Georgia was appointed the personal representative of his estate. She applied for and received the proceeds of the PSP. Eric, claiming he was the designated beneficiary of the PSP, petitioned the probate court to determine the disposition of the proceeds. The probate court awarded them to Eric. Georgia filed a delayed application for leave to appeal which the Court of Appeals denied. Georgia applied for leave to appeal to the Supreme Court. In lieu of granting leave, the Supreme Court remanded to the Court of Appeals for consideration of the probate courts jurisdiction and Georgia’s right to the proceeds under the Employee Retirement Income Security Act of 1974 (ERISA). The Court of Appeals reversed the probate court.
The Court of Appeals first addressed the issue of jurisdiction. They pointed out that the probate court had decided issues concerning the validity of Ernest’s marriage to Georgia, whether a copy of Ernest’s will should be admitted to probate and then distribution of the assets of the estate. They concluded that the probate court had subject matter jurisdiction over all these issues, citing MCL700.1302 and 700.1303. The more difficult issue concerning jurisdiction was whether the probate court had jurisdiction over distribution of the PSP proceeds even though the PSP plan was governed by ERISA, a federal law. The Court held that ERISA is an exclusive remedy which preempts state law causes of action that relate to an employee benefit plan. Federal courts generally have subject matter jurisdiction over ERISA claims. However, the Legislature provided concurrent jurisdiction to state and federal courts for claims brought by a beneficiary to recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. Because Eric sought to enforce rights as a designated beneficiary under the PSP, Michigan courts and federal courts had concurrent jurisdiction over his petition. Therefore, the probate court did not err under ERISA when it asserted jurisdiction.
The Court of Appeals then addressed Georgia’s claim that, under ERISA, Ernest needed her consent to uphold his election of Eric as the beneficiary of his PSP. The Court of Appeals observed that ERISA requires that pension plans include qualified joint and survivor annuities to non participating spouses of deceased vested plan participants. The purpose of such requirement is the economic security of surviving spouses. In this case, Ernest elected Eric as a beneficiary prior to the marriage. Georgia did not consent to the election following the marriage. The issue then, in this case, is whether an election by an unmarried participant is effective following the participant’s subsequent marriage if the spouse fails to consent to the election.
In resolving the issue, the Court of Appeals cited the last sentence of USC 1055(c) which provides: “Any consent by a spouse (or establishment that the consent of a spouse may not be obtained) under the preceding sentence shall be effective only with respect to such spouse.” The Court of Appeals held that this language contemplates the possibility of subsequent spouses and grants them the same consent rights enjoyed at the time of the election. They reasoned that this interpretation is consistent with the purpose of ERISA to protect surviving spouses. It is also consistent with cases from other jurisdictions. Therefore, the Court of Appeals concluded that an election by an unmarried participant is not effective following a subsequent marriage if the new spouse fails to consent to the election. In this case, Georgia did not provide consent to Ernest’s election of Eric according to 29 USC 1055(c). Thus, the probate court erred when it determined that Eric was the proper beneficiary.
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