Family feuds: Advisers navigate beneficiary designation disputes

• Key Insight: Learn why beneficiary disputes are increasingly decided under state probate law, not ERISA.
• What's at Stake: Plan sponsors face litigation exposure, payment uncertainty, and compliance complexity across states.
• Forward Look: Expect state-mandated IRAs and evolving probate precedents to reshape survivor benefit strategies.
• Source: Bullets generated by AI with editorial review

Larry Leo Fritz II initially named his two children as beneficiaries of his benefits plan maintained under a Kraft Heinz savings account. He later changed that designation to his mother Rita Fritz, who cared for her son leading up to his involuntary psychiatric admission and subsequent death, as the sole beneficiary. 

That's when everything went sideways.

The Fritz siblings sued their grandmother in Ohio probate court, alleging incapacity or undue influence. Then came a federal interpleader action to determine the correct beneficiary. In Kraft Heinz Food Co. v. Fritz, issued on July 23, 2025, U.S. District Court Judge James R. Knepp II ruled that disputes over forged or influenced beneficiary designations are governed by state law, not ERISA-specific rules. Whether or not the Fritz siblings ultimately inherit plan proceeds will depend on how the state probate court rules.

Another court ruling nearly three months earlier demonstrated how a similar showdown played out following a divorce and second marriage. The Fifth Circuit Court of Appeals ruled that a 401(k) plan accurately disclosed its policy that marriage voids a participant's prior beneficiary designation unless a spousal waiver is executed. 

Read more: Why advisers must champion fiduciary training for clients

In LeBeuf v. Entergy Corp., the participant's surviving second spouse received about $3 million, while his four children who named as beneficiaries prior to his second marriage received nothing at all. That's because the participant's second spouse did not sign the required spousal waiver. A former spouse, however, can always negotiate to receive a portion of the participant's benefits through a qualified domestic relations order. 

The U.S. Supreme Court ruled in 2009 in Kennedy v. DuPont Savings & Investment Plan that an ex-spouse was entitled to her deceased husband's benefit plan assets because she was still named as the beneficiary. The court noted that the plan documents, not the divorce decree, determined the beneficiary and that a plan administrator must follow the plan's own rules for designating beneficiaries under ERISA. 

Avoiding feuds and litigation

These modern family dramas serve as examples of what could go wrong when relatives feud over a deceased loved one's qualified retirement plan assets. Failure to understand a plan's beneficiary designation requirements following life events will spark not only family conflicts but also litigation. 

However, benefit advisers can share best practices with their clients to help prevent disputes and keep beneficiary designations running smoothly, according to Jack Towarnicky, counsel, Koehler Fitzgerald, member aequum, citing a seminal U.S. Department of Labor report that provides detailed guidance on this topic. 

Whereas a family home used to be the prime asset that would pass to heirs at one's death, he says "that's not necessarily the case anymore, and there are people with six and seven-figure account balances sitting out there." 

Read more: Why long-term care should be included in financial planning

While brokers can promote legal-assistance programs to help minimize the number of beneficiary disputes, he says another selling point to stepping up education in this area is that a substantial portion of medical spend occurs in the last six months of life.

"It's important to have beneficiary designations and wills executed, and a durable power of attorney for healthcare, as well to make sure that one's wishes with respect to treatment are known should someone be unable to make those decisions," he says, noting that open enrollment is an ideal time to remind plan participants to do so.

A total benefits and compensation statement also could highlight what survivor benefits would be and name beneficiaries so that the information is top of mind at the end of each plan year, he says. His point is that participants receive some form of a regular notification. 

Understanding uneven rules

It's also important to recognize that retirement plan rules don't apply to life insurance as part of the Retirement Equity Act in 1984, which Towarnicky says means one beneficiary could receive pension benefits while another receives life insurance proceeds. 

A 401(k) participant might take a plan distribution, roll it over into an IRA and name someone else as the beneficiary without telling his or her spouse, he explains. "What you are hoping for is the participant makes an informed decision, notifies everybody who's important to them what that decision was and continues to keep it up to date," he says. 

The SECURE Act of 2019 eliminated for most beneficiaries an estate planning strategy that was known as a "stretch IRA" through which a non-spouse beneficiary could withdraw required minimum distributions over their lifetime. Most non-spouse heirs are now required to withdraw the entire account balance within 10 years. 

Read more: Providing financial peace of mind with estate planning benefits

Several states, including Oregon, California, Illinois and Connecticut, have adopted state-mandated IRAs to minimize the amount of public spending on retirees and prevent surviving spouses from becoming wards of the state.

"There's a lot you want to avoid in life and death, and one of them is a dispute over what happens to your benefits from the perspective of the participant, and just as important, from the perspective of the plan sponsor and administrator," Towarnicky observes. "The last thing you want is a dispute over who's supposed to get the money. Worse, and most important, unlike most other benefit elections, participants have no opportunity for an appeal."