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Ex-Wife, Deceased Father, Executrix Daughter, Retirement Account, and Annuity
July 19, 2016
Death or Divorce: No . . . it's not the only choice for unhappily married couples but it sure as hell are a couple of things that can have unintended consequences on a family's finances. As is often the case, a husband and wife often open brokerage and bank accounts in joint names and then each partner may purchase individual insurance policies, annuities, and the like. Typically, the longer the marriage, the more expansive the various provisions for retirement and survivorship become. Unfortunately, marriages don't always go the distance. Unfortunately, ex-spouses don't always pay attention to unraveling the many connections that they built between them. Following divorce, ex-husbands and ex-wives may forget to delete the former spouse from accounts and policies. Following remarriage, husbands and wives may forget to add the new spouse to accounts and policies. Once death enters the pictures, it's those forgotten things that rear their ugly heads and cause havoc. Consider a recent FINRA arbitration in which a deceased's estate sues Morgan Stanley and Sun America over what should or should not have happened after the dissolution of the deceased's marriage.
Case In Point
In a Financial Industry Regulatory Authority ("FINRA") Arbitration Statement of Claim filed in August 2014, Claimant Shannon Nafaa sought a declaratory judgment and asserted breach of contract and negligence in connection with her allegations that Respondents Morgan Stanley and Sun America had failed to properly and reasonably transfer ownership of a retirement account (held by Morgan Stanley) and an annuity (held by Sun America) in accordance with a divorce agreement. In the Matter of the Arbitration Between Shannon Nafaa, Individually and as the Executrix of the Estate of Raymond Ryals, Claimants, vs. Morgan Stanley Smith Barney, LLC, Linda Ryals, and Sun America Annuity & Life Insurance Company, Respondents - AND - Sun America Annuity & Life Insurance Company, Cross-Claimant, vs. Linda Ryals, Cross-Respondent (FINRA Arbitration #14-02663, July 5, 2016).
The divorce agreement at issue in the arbitration apparently pertained to the dissolution of the marriage of Raymond Ryals and Respondent and Cross-Respondent Linda Ryals. At the arbitration hearing, Claimants sought $226,389.37 in compensatory damages plus interest, costs, and attorneys' fees.
Respondents Morgan Stanley Smith Barney, Sun America, and Linda Ryals generally denied the allegations and asserted various affirmative defenses.
Cross Claim
Respondent Sun America Cross-claimed against Respondent Ryals and asserted negligence, constructive trust, indemnity, and contribution. As set forth in the FINRA Arbitration Decision:
Sun America alleged that it is entitled to indemnity and contribution based on Linda Ryals' unjust enrichment from her failure to respond and or provide documentation relating to the annuity contract, which resulted in Sun America not changing the Owner of the Policy and the contract benefit being paid to Linda Ryals.
Decision
The FINRA Arbitration Panel denied Claimants' claims and, accordingly, Cross-Claimant Sun America's counter-claims were deemed withdrawn and dismissed.
Bill Singer's Comment
The only mention in the FINRA Arbitration Decision of "Raymond Ryals" is found in the caption, where Claimant Shannon Nafaa is listed as the "Executrix of the Estate of Raymond Ryals." There is no further mention whatsoever of Raymond Ryals or other family affiliations in the FINRA Arbitration Decision.
Not presented in the FINRA Arbitration Decision but found online is the disclosure that a Raymond Ryals died on August 30, 2012, and was survived by:
[H]is daughters, Theresa Woods (Mark) and Shannon Ryals Nafaa (Brahim); the mother of his children, Linda Havens Ryals; father, Allen H. Ryals; brother, Ken Ryals (Linda); other relatives and friends.
What we learn from the online obituaries above is that Raymond Ryals had been married to a "Linda Havens Ryals," who is referenced in his obituary as "the mother of his children" but not referenced as his wife at the time of his death. Also, we learn that Claimant Shannon Ryals Nafaa is the daughter of Raymond Ryals and apparently Linda Havens Ryals. We infer from the obituary and the FINRA Arbitration Decision that Raymond and Linda Ryals were divorced as of the time of Raymond's death in 2012. Consequently, Claimant Shannon Nafaa, who sued in her individual capacity and in her capacity as the Executrix of her father's estate, appears to have named her mother and father's ex-wife as a respondent (Linda Ryals).
Having no first-hand knowledge of the underlying events or legal dispute beyond what is presented in the FINRA Arbitration Decision, I cannot, should not, and will not hazard an informed opinion as to what should or should not have happened in terms of pursuing the claims. As is often the case, the dissolution of a marriage and the creation of an estate for one of the former spouses are circumstances that are so fact-dependent and amenable to the influence of many personal considerations (often quirky) that it makes little sense for me to comment on how the underlying disputes were handled and adjudicated.
In the end, I remain puzzled as to why and/or how the Raymond Ryals Estate wound up suing the ex-wife in a FINRA arbitration rather than in a state court -- or why some or all of the issues were not addressed in the divorce decree. That is not a criticism but merely the noting of a sincere question for which I know that there may be a number of sensible answers (one of which may be that, indeed, a lawsuit was commenced in state court but we are not informed of that in the FINRA Arbitration Decision). Also, I wonder Raymond Ryals did not change the beneficiary of the contested annuity contract or why such a revision wasn't handled within the context of the divorce decree. Again, my question is not a criticism but merely an attempt to underscore the sparsity of facts and rationale in the Decision.
Also READ:
Estate Sues BD And Broker Over Lawyer's Designation Of Ex-Wife As IRA Beneficiary (BrokeAndBroker.com Blog, May 17, 2011)