DEATH AND DIVORCE

By: Sheryl Seiden and Kaitlyn McCracken[1]

What had been known for many years as the “the Blackhole,” which was created by the conflict between the elective share and equitable distribution statutes, has been eliminated with the passing of new legislation in 2023. The new statute became effective on January 8, 2024.  Not only did the new legislation eliminate “the Blackhole,” but it did so retroactively. Roik v. Roik, 477 N.J. Super. 556, 561 (App. Div. 2024). The elective share statute protects a surviving spouse from being disinherited by their spouse as it provides that the surviving spouse should receive one-third of his/her augmented estate.  The equitable distribution statute provides for the equitable division of the marital assets at the time of the parties’ divorce.  The problem that resulted was that that the equitable distribution laws could not be applied after a spouse died and the elective share rights did not permit a party who had grounds for a divorce or has initiated divorce proceedings to receive his/her one-third share of the augmented estate of the deceased spouse. In certain cases, this left the surviving spouse without a remedy under the equitable distribution statute and without a remedy under the elective share rights. Hence, this problem created what was then known as “the Blackhole” without a remedy within in our laws. So what was a surviving spouse to do to ensure that he/she could receive a portion of the marital estate upon the death of a spouse where a judgment of divorce had not yet been entered?

The elective share laws in New Jersey provide a critical safety net for surviving spouses, offering them a guaranteed portion of their late spouse’s estate to prevent complete disinheritance. Defined by state law, the elective share typically constitutes one-third of the deceased spouse’s augmented estate. This includes both probate and certain non-probate assets, ensuring a broader scope of financial protection. The augmented estate also includes assets passing under the will of the deceased spouse, plus certain assets that may have been transferred during the last two years of their life. It may also include a portion of the surviving spouse’s assets.  

The purpose behind the elective share laws is intended to ensure that surviving spouses are not left destitute as a result of being disinherited by their spouse in said spouse’s will. The applicability of this law is connected to the marital status of the parties involved, making it a fundamental aspect of estate planning and marital considerations in New Jersey. 

However, when a marriage ends in divorce, it brings with it significant alterations to the entitlements previously shared between spouses, notably impacting a spouse’s right to an elective share in New Jersey. The dissolution of marriage results in an immediate cessation of the surviving spouse’s right to claim an elective share of the deceased’s estate. However, the process of becoming legally divorced is not always easy or expeditious, to such an extent that one spouse may pass away prior to the divorce becoming finalized.  

Navigating the intricacies of elective share rights necessitates an understanding of the limitations associated with separate property. In New Jersey, not all assets are treated equally when it comes to calculating the elective share. Specifically, the augmented estate, which forms the basis for the elective share calculation, may exclude certain types of assets which would otherwise be exempt from equitable distribution.

In the realm of marital dissolution, the intersection of divorce and elective share rights presents a critical area of focus. An understanding of the shifts in financial entitlements that accompany the end of a marriage is vital to safeguard one’s financial legacy and intentions. By taking proactive steps to update estate documents in the wake of marital changes, individuals can ensure that their financial future is protected, reflecting their updated circumstances and desires. This strategic approach empowers individuals to manage their estate with foresight and precision, amidst the intricacies introduced by a divorce. 

The Equitable Remedies Previously Available

Prior to the amendments to N.J.S.A. 3B:8-1, this conflict between the equitable distribution and elective share laws arose in the matter of Carr v. Carr, [i] where the Husband died during the divorce proceedings prior to the entry of a judgment of divorce, and his will bequeathed all of his assets to his children. In that case, the Supreme Court of New Jersey held that the laws of equitable distribution cannot apply after a spouse died. The Court also acknowledged that the elective share rule did not apply after the Wife filed for divorce. Recognizing that this left the Wife in a “blackhole,” the Court imposed a constructive trust on the marital assets and remanded the matter to the trial court to determine how to equitably provide the Wife with a portion of the marital estate. The Wife was then compelled to litigate the matter against the executor of the deceased Husband’s estate in order to ensure that she would receive a portion of the parties’ marital assets. While the Supreme Court of New Jersey did recognize the need for equitable remedies, it did not determine her share of the marital estate. 

In Carr, the parties had been married for seven years and all of the assets were bequeathed to the Husband’s children, and the Wife had a claim for dissipation of marital assets in the underlying matrimonial matter.  In Carr, the Court resorted to its equitable powers to establish a constructive trust over the deceased spouse’s assets to ensure that the surviving spouse received some assets as an equitable remedy. Unfortunately, Carr, only provided minimal guidance, as lawyers could not assume equitable remedies would be applied in every case.[ii] In order to succeed in the establishment of the constructive trust, the moving party has the burden to establish by clear and convincing evidence that (a) the asset has been received or retained through a wrongful act (which can include an innocent mistake) and (b) which unjustly enriches the recipient. Id.

In Kay v. Kay[iii], the Supreme Court of New Jersey addressed the issue of whether the equity remedies available in Carr v. Carr are available to the estate of the deceased spouse in a divorce action to ensure that his estate receives an equitable share of the marital assets after his/her death. Similar to the facts of Carr, the husband had a claim of dissipation of marital assets, and the court permitted the estate to continue the litigation of these issues after the death of the husband. In addressing this case, the Supreme Court of New Jersey specifically invited our legislature to review the Blackhole at issue.[iv] 

Then, attorneys were left with another problem, even if the Court established a constructive trust, if the specific allocation of the marital assets between the surviving spouse and the estate cannot be agreed to, then the issue of specifics of the equitable remedy would have been left to the sound discretion of the trial court. Practitioners could not assume or rely upon an equitable remedy to yield an equal allocation of the assets in the deceased spouse’s estate as would likely be the case if the assets were equitably distributed.

The Efforts of The Family Law Section to Eliminate the Blackhole

In 2014, the Family Law Executive Committee (“FLEC”) was asked to review the New Jersey Law Revision Commission’s (“Commission”) November 7, 2011 Final Report which provided proposed changes to NJSA 2A:34-23(h) and NJSA 3B:8-1 and NJSA 3B:5-3 to address the “Blackhole” that exists between these two statutes. The Commission’s proposed changes that addressed the “the Blackhole” created an avenue for the bifurcation of equitable distribution issues in matrimonial matter.  In 2015, under the reign of Jeralyn Lawrence, Esq., who was Chair of the Family Law Section at the time,  established an Elective Share Committee (“Committee”), chaired by Sheryl Seiden, Esq. to address the Commission’s Report. The Committee accepted some of the changes proposed by the Commission and proposed other changes to close “the Blackhole.” These changes were approved by FLEC and then submitted to the NJSBA for approval.

Unfortunately, initially, the Elder and Disability Law Section did not want to eliminate “the Blackhole” as their lawyers used this conflict between the elective share laws and equitable distribution laws as an estate planning tool. Specifically, they used “the Blackhole” to enable their clients to obtain Medicare benefits while permitting the other spouse to retain the marital assets.  The old law provided that if there were grounds for divorce and the parties were living separate and a part at the time of one spouse’s death, the surviving spouse could not seek an elective share of the deceased spouse’s estate.  As the laws changed in 2007 to permit divorce on the grounds of no-fault, virtually every surviving spouse could claim that there were grounds for divorce at the time of the deceased spouse’s death.   

As such, in cases where one party needed to reside in a nursing home, all of the marital assets would be held in the other party’s name.  Because the parties had been living separate and apart at the time, they could claim that grounds for divorce existed in order to avoid allocating the monied spouse’s estate. With the change in the grounds available to file for divorce which permitted the filing of a divorce complaint based on uncontested grounds in 2007, every litigant can argue that grounds for a divorce exist in his/her marriage. This therefore shielded the marital assets from being used to pay for the surviving spouses’ care which made that party eligible for Medicare benefits. As a result, the Elder and Disability Section did not consent to changes to the elective share statute which eliminated this estate planning tool. This created a conflict within the NJSBA which brough this issue to a standstill.

The Conflict Between the Elder Law Section and

Family Law Section In Addressing This Issue Was Resolved By Case Law

 

In 2017, the Appellate Division decided In the Matter of Estate of Arthur Brown Deceased, 448 N.J. Super 252, which eliminated the estate planning tool that elder law attorneys employed under NJSA 3B:8-1 to assist their clients with Medicaid Planning. In Brown, the New Jersey Division of Medical Assistance and Health Services (“DMAHS”) filed for a priority lien against the estate of Arthur Brown seeking reimbursement for the $166,981.25 in Medicare aid provided to Mr. Brown during his lifetime. Mr. Brown’s children then filed suit seeking to dismiss the lien. DMAHS argued that Mr. Brown’s estate should have received one-third of the assets held by his wife at the time of her death under the elective share statute. Although neither Mr. or Mrs. Brown had filed for divorce, the Brown children argued that Mr. Brown was not entitled to one-third of Mrs. Brown’s estate at the time of her death because the parties had been living separate and apart at the time of her death and that grounds existed for a divorce. The trial court rejected the argument made by Mr. Brown’s children that Mr. Brown’s entry into a nursing home gave rise to grounds for a divorce after the parties’ 59 years of marriage. The Appellate Division affirmed the trial court’s enforcement of DMAHS’s lien against Mr. Brown’s estate. The Brown Court therefore prevented parties from using this statute to shield assets in order to receive government benefits.

The New Legislation

As a result of the Brown decision, the estate planning reason for opposition from the Elderly Law and Disability Law Section was eliminated, and the legislation proposed by FLEC was then approved by the NJSBA. In April 2021, Robin Bogan, Esq., the Chair of the Section, Ronald Lieberman, Esq., the Immediate Past Chair of the Section, Lisa Chapland, Esq. NJSBA Senior Manager of Government Affairs, and Sheryl Seiden, Esq. met with Assemblyman Raj Mukherji to explain the issues that were created by “The Blackhole” in our laws and our proposed means of resolving this conflict.  He appreciated and welcomed the suggested revisions and, in response, he accepted FLEC’s proposed changes to both the Elective Share and Equitable Distribution Statutes and became the sponsor of Assembly Bill No. 2351 to amend these statutes. The companion bill, NJS2991 was sponsored by Senator Troy Singleton and permitted the Court to effectuate equitable distribution when a complaint for divorce has been filed and either party died prior to the judgment of divorce being entered.

Assembly Bill 2351

The purpose of New Jersey Assembly Bill 2351 is as follows:  

This bill provides that if a complaint has been filed for divorce, dissolution of a civil union, or divorce from bed and board, and either party dies prior to the entry of a final judgment, the court has authority to order equitable distribution of the couple’s property. The bill provides that under these circumstances the surviving spouse, civil union partner, or domestic partner would not have a right to an intestate share or an elective share of the decedent’s estate.

 

Under current law, if a spouse or partner dies while the divorce or dissolution is pending, the survivor is excluded from equitable distribution. At the same time, current law provides that if both parties were living separately, the survivor is also excluded from an elective share of the decedent’s estate. 

 

The bill also clarifies a provision in current law which bars the court from making an equitable distribution award on behalf of a party convicted of an attempt or conspiracy to murder the other party. Under the bill, the court is also barred from making an award concerning equitable distribution on behalf of a party barred from inheriting under N.J.S.A. 3B:7-1.1.  The referenced statute provides, among other provisions, that a person responsible for an intentional killing forfeits all benefits with regard to an intestate share or elective share of the decedent’s estate.

 

In addition, the bill expands the laws of intestate succession and elective share to encompass a surviving partner in a civil union. Currently, these statutes apply only to a surviving spouse or surviving domestic partner.

 

Thus, by adding the following highlighted language to statute N.J.S.A. 3B:8-1, the aforesaid was accomplished:

 

If a married person, partner in a civil union, or person in a domestic partnership dies domiciled in this State, [on or after May 28, 1980,] the surviving spouse, partner in a civil union, or domestic partner has a right of election to take an elective share of one-third of the augmented estate under the limitations and conditions hereinafter stated, [provided that at the time of death the decedent and the surviving spouse or domestic partner had not been living separate and apart in different habitations or had not ceased to cohabit as man and wife, either as the result of judgment of divorce from bed and board or under circumstances which would have given rise to a cause of action for divorce or nullity of marriage to a decedent prior to his death under the laws of this State] unless either the decedent or the surviving spouse, partner in a civil union, or domestic partner had filed a complaint not dismissed pursuant to R.4:6-2 of the Rules of Court, for divorce, dissolution of civil union, termination of domestic partnership or divorce from bed and board.

 

Concurrently, N.J.S.A. 3B:5-3 was also amended with the following subsection to exclude from the definition of a Surviving Spouse who had rights under the elective share statutes, as follows:

  1. For purposes of this section:

      “Surviving spouse, partner in a civil union, or domestic partner” shall not include; 

      (1) an individual who has filed a complaint not dismissed pursuant to R.4:6-2 of the Rules of Court, or against whom a complaint not dismissed pursuant to R.4:6-2 of the Rules of Court, has been filed for: divorce, dissolution of civil union, termination of domestic partnership, or divorce from bed and board; or

      (2)  an individual who has entered into a validly executed equitable distribution cut-off agreement or termination agreement where the underlying subject matter of the complaint or equitable distribution cut-off agreement or termination agreement is divorce, dissolution of civil union, termination of domestic partnership or divorce from bed and board; or

      (3)  an individual who at the time of death of the decedent had:

                 (a)  ceased to cohabit with the decedent under circumstances which would have given rise to a cause of action for divorce or nullity of marriage to a decedent prior to his or her death under the laws of this State; and

                   (b)  where, through written agreement, affirmative acts, or both written agreement and affirmative acts of the individual and decedent there had been a division of assets equivalent to equitable distribution; or

      (4)  an individual who, at the time of death of the decedent, had entered into a validly executed marital settlement agreement with the decedent where the underlying subject matter of the marital settlement agreement is divorce, dissolution of civil union, termination of domestic partnership, or divorce from bed and board.

 

            Accordingly, no formal divorce litigation is required to have commence in order to foreclose a soon-to-be/prospective former spouse-to-be from being deemed a surviving spouse. 

 

 

The Impact of the 2024 Amendments to The

Elective Share and Equitable Distribution Statutes

The salient point of the law, both before and after the recent cases and statutory amendments, is that a surviving spouse may pursue ether an elective share or equitable distribution – not both, and not neither.

Under the prior law, the filing of a divorce complaint extinguished the parties’ claims for equitable distribution. Roik v. Roik, 477 N.J. Super. supra and the 2024 statutory amendments corrected that outcome. Once a divorce complaint is filed, elective-share and intestate rights are eliminated, but equitable distribution survives death and becomes the exclusive mechanism for resolving marital property rights. Id.  The purpose is not to expand available remedies, but to ensure that equitable distribution does not terminate solely because judgment was not entered before a party’s death.

In Roik v. Roik the Appellate Division addressed the recent statutory changes and their effect on the long-standing “Blackhole” that arose when a spouse died while a divorce was pending. [v] Id. Historically, death abated the divorce action, extinguished equitable distribution, and simultaneously barred the surviving spouse from an elective share once a divorce complaint had been filed. The result was often an unintended windfall to one side and no meaningful remedy for the other, other than in limited circumstances. Roik v. Roik, 477 N.J. Super. supra, 562.

In Roik, the parties were married for forty-six years and had fully negotiated and executed a marital settlement agreement (“MSA”). The agreement expressly provided that the MSA would be incorporated into a Judgment of Divorce and, “[i]n any event, whether the [c]ourt allows this [a]greement to be incorporated into said [j]udgment”. Additionally, it provided that the MSA, and all of its terms, would survive the judgment and be valid and enforceable. Further, it was effective upon execution and binding on the parties’ estates. Thereafter, although an uncontested hearing was scheduled, the husband died before it could take place.  Id. at 563.

The trial court dismissed the divorce and refused to enforce the MSA, reasoning that the court had never conducted a voir dire of the parties and had not made findings that the agreement was knowing and voluntary. As a result, the surviving spouse would have received the marital home by operation of law and avoided the financial obligations imposed by the MSA.

The Appellate Division reversed. The Court determined that “[i]ndependent of the new statutes” where parties have entered into a fully executed, “arm’s length MSA” that is “fair and equitable”, the Family Party has the authority to enforce it even if one party dies before entry of the final judgment, particularly where the record demonstrates that it would have been entered if it were not for scheduling delays. Id. [vi] The Appellate Division found that the absence of a formal uncontested hearing was not dispositive under these circumstances.

Further, and more significantly for future cases, the court then addressed the 2024 legislative amendments to New Jersey’s intestacy, elective share, and equitable distribution statutes and found, inter alia, that they apply retroactively. Those amendments expressly provide that the filing of a divorce complaint eliminates intestate and elective-share rights but does not divest the court of authority to equitably distribute marital property if a party dies before the judgment of divorce is entered. The Appellate Division held these statutory changes apply retroactively to cases still in the pipeline, concluding the Legislature intended to cure the precise inequity created by prior statutes.

Roik represented a major shift in New Jersey law. It confirmed that death no longer automatically cauterizes equitable distribution claims and that courts may enforce negotiated marital agreements despite the absence of a final judgment. Separately from the implications related to the new estate statutes, the case underscored the importance of clearly drafted MSAs and contained an explicit rejection of outcomes driven by procedural happenstance rather than the parties’ expressed intent.

It is important that we guide our clients on these amendments. Procedurally, if a party dies during the pendency of a divorce action, the estate should promptly move to substitute as the real party in interest.[vii] It is also important to recognize that this area of the law is still developing, and there are limited cases regarding the application of these principles.

The use of a cut-off or termination agreement is a common tool in family law matters. It allows parties to agree on a termination date without the need to file a complaint for divorce and commence the litigation process. Not only is this seen as a more amicable means of resolving matters but it avoids unnecessary court appearances and legal fees, and preserves the right to later file for divorce. The purpose of the cut-off agreement is to have the same effect as the filing of a complaint for divorce. As such, the newly amended statutes specifically include the execution of a cut off agreement as having the same effect as if a complaint for divorce was filed. A sample cut off agreement is attached hereto as Exhibit A.

 

Effect On Equitable Distribution

 

There is not much reported guidance yet on how courts are applying the new statutory scheme to equitable distribution claims when a party dies during the divorce. In my experience, courts appear less inclined to favor the estate where there is a surviving spouse, particularly where the equities weigh in favor of protecting the surviving spouse’s financial position.

One issue that should be carefully considered is support. In many cases where parties are divorced prior to the death of the ex-spouse, an ex-spouse who is entitled to alimony would have that obligation secured by life insurance or other means.  While the amendments to the elective share and equitable distribution laws was intended to ensure that a spouse’s rights to equitable distribution do not abate with a divorce, a spouse does not have the same right to alimony after the death of a spouse during the pendency of a divorce.

N.J.S.A. 2A:34-23.1 sets forth the factors the Court must consider when making an equitable-distribution determination.

 

  1. The duration of the marriage or civil union;
  2. The age and physical and emotional health of the parties;
  3. The income or property brought to the marriage or civil union by each party;
  4. The standard of living established during the marriage or civil union;
  5. Any written agreement made by the parties before or during the marriage or civil union concerning an arrangement of property distribution;
  6. The economic circumstances of each party at the time the division of property becomes effective;
  7. The income and earning capacity of each party, including educational background, training, employment skills, work experience, length of absence from the job market, custodial responsibilities for children, and the time and expense necessary to acquire sufficient education or training to enable the party to become self-supporting at a standard of living reasonably comparable to that enjoyed during the marriage or civil union;
  8. The contribution by each party to the education, training or earning power of the other;
  9. The contribution of each party to the acquisition, dissipation, preservation, depreciation or appreciation in the amount or value of the marital property, or the property acquired during the civil union as well as the contribution of a party as a homemaker;
  10. The tax consequences of the proposed distribution to each party;
  11. The present value of the property;
  12. The need of a parent who has physical custody of a child to own or occupy the marital residence or residence shared by the partners in a civil union couple and to use or own the household effects;
  13. The debts and liabilities of the parties;
  14. The need for creation, now or in the future, of a trust fund to secure reasonably foreseeable medical or educational costs for a spouse, partner in a civil union couple or children;
  15. The extent to which a party deferred achieving their career goals; and
  16. Any other factors which the court may deem relevant.[viii]

 

When determining the allocation of marital assets, the courts are charged with equitably distributing these assets, which does not always mean equally distributing these assets. This concept is even more pronounced when one spouse dies during the pendency of a divorce. With a death of the payor spouse in a case where the surviving spouse was not the beneficiary of life insurance, these facts should be considered by the Court when awarding equitable distribution to the surviving spouse.

In these cases, several statutory factors have a greater importance, including, inter alia, factors (f), (i), and (n). Those factors should be addressed directly and developed fully, particularly because many of the usual countervailing considerations present in a typical divorce, are no longer in play. When requesting equitable distribution for the surviving spouse, it is important to submit a more strategic equitable distribution analysis than they would have if both parties were living.

 

Judgment Of Divorce Effect On A Will

 

The entry of a judgment of divorce invalidates certain designations for the surviving spouse set forth in a deceased spouse’s will. Specifically,  N.J.S.A. § 3B:3-14 provides:

  1. Except as provided by the express terms of a governing instrument, a court order, or a contract relating to the division of the marital estate made between the divorced individuals before or after the marriage, divorce or annulment, a divorce or annulment:

(1) revokes any revocable:

(a) dispositions or appointment of property made by a divorced individual to his former spouse in a governing instrument and any disposition or appointment created by law or in a governing instrument to a relative of the divorced individual’s former spouse;

(b) provision in a governing instrument conferring a general or special power of appointment on the divorced individual’s former spouse, or on a relative of the divorced individual’s former spouse; and

(c) nomination in a governing instrument of a divorced individual’s former spouse or a relative of the divorced individual’s former spouse to serve in any fiduciary or representative capacity; and

(2) severs the interests of the former spouses in property held by them at the time of the divorce or annulment as joint tenants with the right of survivorship or as tenants by the entireties, transforming the interests of the former spouses into tenancies in common.

            Recognizing that parties do not always revise their estate planning documents immediately following a divorce, and acknowledging the reality that most individuals do not intend their former spouse to remain a beneficiary, the Legislature provided for the automatic revocation of certain testamentary and beneficiary designations upon entry of a judgment of divorce. That provision is intended to prevent results that are inconsistent with the parties’ post-divorce intent, even where estate documents have not yet been updated.

Given the change in the landscape in the elective share and equitable distribution laws, the issue of whether the filing a complaint for divorce or execution of a valid cut off agreement/termination agreement should trigger the termination of rights under a will or other estate-planning document should be examined. Unlike elective share laws which govern the allocation of one’s estate by statute, a will is a voluntary designation of one’s estate. For that reason, it can be voluntarily changed by the spouse without the need for consent of other spouse or a court order. In considering that fact, some courts have declined to vacate the designation in a deceased spouse’s will on the grounds that the deceased spouse had the opportunity to make this change prior to his/her death and the fact that he/she did not do so evidences his/her intent that his/her spouse remain the beneficiary of his/her estate.

Where a party has the ability to change a beneficiary designation and does not do so, the Court is likely obligated to abide by the clear language of the beneficiary designation. A strict reading of N.J.S.A. 3B:3-14, and close attention to the governing instrument at issue, are critical, as illustrated by the Supreme Court’s decision in In re Estate of Jones, 259 N.J. 584 (2025).  

In Jones, the parties entered into a marital settlement agreement (“MSA”) that addressed the distribution of various assets but did not specifically identify or dispose of U.S. savings bonds. The MSA included a standard catch-all provision providing that any property not specifically listed would belong to the party in possession. After the Judgment of Divorce was entered, the husband died without having fully satisfied his equitable distribution obligation to the wife. Following his death, the wife redeemed savings bonds for which she was the named beneficiary. She also sought payment of the remaining unpaid equitable distribution due her under the terms of the MSA from the husband’s estate. The estate argued that the value of the bonds should be credited against the outstanding equitable distribution due her.

The trial court agreed with the estate and concluded that the wife was not entitled to any further recovery beyond the amount she received from the value of the US Savings bonds that she received.  The Appellate Division reversed, reasoning that N.J.S.A. 3B:3-14 conflicted with, and was therefore preempted by, federal law governing U.S. savings bonds. The Supreme Court reversed the Appellate Division in part. While it ultimately agreed that the bonds could not be credited toward the husband’s unpaid equitable distribution obligation, it rejected federal preemption as the basis for that conclusion.

Instead, the Court focused on the language of the parties’ MSA. Because the agreement did not direct the disposition of the savings bonds, the bonds had no bearing on the estate’s obligation to satisfy the outstanding equitable distribution payment. The wife’s rights as beneficiary of the bonds were separate from, and did not offset, the husband’s independent contractual obligation under the MSA.

In reaching that conclusion, the Court examined N.J.S.A. 3B:3-14, which governs the revocation of probate and non-probate transfers upon divorce. As relevant, the statute provides that, “[e]xcept as provided by the express terms of a governing instrument,” a divorce revokes any revocable disposition of property to a former spouse. N.J.S.A. 3B:3-14(a)(1)(a). N.J.S.A. 3B:1-1defines a “governing instrument” to include securities registered in beneficiary form, including bonds payable on death..

The Court then reviewed the federal regulatory framework governing Series EE savings bonds. Under those regulations, savings bonds may be registered in pay-on-death form, and upon the owner’s death, the surviving beneficiary is recognized as the sole and absolute owner. 31 C.F.R. §§ 353.7(a)(3). The Court noted that although the Treasury generally will not recognize judicial determinations that impair federally created survivorship rights, it will recognize divorce decrees and property settlement agreements that expressly dispose of bonds, as well as valid judicial proceedings establishing claims against an owner or competing ownership interests. 31 C.F.R. §§ 353.20, 353.22, 353.23.

The Supreme Court rejected the Appellate Division’s preemption analysis. They explained  that federal law preempts state law where compliance with both is impossible; however, the Court found no such conflict here. N.J.S.A. 3B:3-14 expressly defers to the terms of the governing instrument, and in this case, the governing instrument was the pay-on-death registration of the bonds themselves. Because that instrument expressly provided for survivorship, no automatic revocation occurred by operation of state law.

Critically, the Court also emphasized that the MSA did not alter or revoke the wife’s beneficiary designation. The agreement was silent as to the bonds, and the catch-all provision merely confirmed her ownership interest. As a result, the wife’s receipt of the bond proceeds did not satisfy or otherwise affect the husband’s outstanding equitable distribution obligation. The estate therefore remained liable for the unpaid balance.

Jones reinforces the importance of being precise. Where an MSA does not dispose of an asset, courts will generally not treat it as having done so and where equitable-distribution obligations remain outstanding, estates may be required to satisfy them.

In the unreported case of Acosta – Santana v Santana, the husband died prior to the entry of a judgment of divorce. The executor sought to interplead, and argued, inter alia, that the husband “was always very clear that he did not want his share of assets to be acquired by” the wife and requested the Court to issue a constructive trust in favor of the estate. Acosta-Santana v. Santana, No. A-5646-16T4, 2018 N.J. Super. Unpub. LEXIS 2667, at *7 (App. Div. Dec. 5, 2018) The Appellate Division held that the outcome turned not on the decedent’s will, but on the non-probate interest in place at the time of death, including jointly held property and beneficiary designations (life insurance in this matter) that passed by operation of law. Because those interests were never changed during the divorce and there was no evidence of fraud, misconduct or other exceptional circumstances, the Appellate Division declined to impose a constructive trust and enforced the interest as they existed when the decedent died because most of defendant’s property was held jointly with plaintiff and defendant was unable to change the beneficiaries of his insurance policies before he died.  Id.

Conclusion

For a many years, New Jersey law left surviving spouses in an impossible position when a spouse died during a divorce. Ones’ rights to equitable distribution would abate with a spouse’s death and one’s rights to elective share were simultaneously terminated with the filing of a divorce complaint, or even where grounds for a divorce existed when the parties were living separate and apart at the time of one’s death.  The result was that a surviving spouse could be left with nothing, and courts were forced to patch together equitable remedies after the fact in order to ensure that some justice was served.

The recent cases and statutory amendments were intended to remedy this  problem. Once a divorce complaint is filed, elective-share and intestate rights end, but equitable distribution does not. Equitable distribution is now the single path for ensuring that the surviving spouse will receive his/her share of marital assets after the death of a spouse after a complaint is filed but before a judgment of divorce is entered. This same concept applies to the estate of the deceased spouse to ensure that his/her family will receive the deceased spouse’s rightful share of marital assets through the laws of equitable distribution.

For family law attorneys, the takeaway is practical. Death during a divorce no longer ends the case, but it changes how it proceeds. We must be deliberate about drafting agreements, intentional in the use of cutoff agreements, and proactive in advising clients on their estate planning. “the Blackhole” that once existed has closed but it has left open another area for us to explore involving the designation of a soon to be ex spouse in one’s estate documents. Unlike “the Blackhole,” this area is one where we can preemptively guide your clients during their lifetime to ensure that their estate planning goals are achieved.

                                                                                                                   

[1] Sheryl J. Seiden, Esq. is a founding partner at SeidenFreed, LLC, which has offices in Northern and Central New Jersey. She is admitted to practice law in both New Jersey and New York. She is a trustee of the NJSBA and the Immediate Past President of the American Academy of Matrimonial Law, New Jersey Chapter. She serves on the Board of Manager of the International Academy of Family Lawyers, USA Chapter. She is a former Chair of the Family Law Section of the NJSBA. Sheryl dedicates her practice to both litigation and serving as a mediator, arbitrator and parenting coordinator in family law matters. The author would like to thank Kaitlyn McCracken, Esq. an associate at SeidenFreed for her assistance in preparing this article. Kaitlyn is also an attorney at SeidenFreed (previously Seiden Family Law), where she began her practice after having completed two clerkships.

 

[i] 120 NJ 336 (1990).

 

[ii] Flanigan v. Munson, 175 N.J. 597, 611 (2003). (a constructive trust should only be granted “when the equities of a given case clary warrant it.”).

 

[iii] 200 NJ 551 (2010).

 

[iv]  “As we commented in Carr, our Legislature has occasionally considered bills that have been designed to address some of the concerns that arise when the statutes governing divorce and equitable distribution and the statutes governing the matters pertinent to decedents’ estates appear to collide. See Carr, supra, 120 N.J. at 350 n.3 (explaining then-recent efforts to create statutory clarity through altering definition of “surviving spouse”). As this appeal highlights a further dimension of the way in which those statutory provisions may conflict, we invite such further consideration of these matters as our Legislature deems appropriate.”

 

[v] [v] The Court’s decision also affirmed the validity and enforceability of the statutes intent.

 

[vi] The Appellate Division’s findings also ruled that evidence was insufficient to support finding that trial judge was so committed to his findings as to warrant his disqualification on remand, and thus appellate court would decline to assign matter to a new trial judge on remand.

 

[vii] Rule 4:34-1 provides (b) Non-Party Survivors. If a party dies and the claim is not thereby extinguished, the court shall on motion order substitution of the proper parties. The motion for substitution may be made by the successors or representatives of the deceased party or by any party, and notice thereof shall be served on parties as provided by R. 1:5-2 and on persons not parties in the manner provided by either R. 4:4 (service of original process), or, if the court directs, R. 4:67-3 (service of orders to show cause).
N.J. Court Rules, R. 4:34-1

 

[viii] N.J.S.A. § 2A:34-23.1

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