Death During Divorce
A divorce proceeding is almost always a terrible situation. A marriage is ending, the parties are hurting, and they know how to hurt each other more. Contested divorces can become messy fast, especially when children are involved. This messiness can stretch out the proceedings so that a couple could wait years before they are officially divorced. One thing that people going through a divorce should consider, though they rarely do, is estate planning.
NY and NJ both have a revocation by divorce rule that can cancel bequests that you have made in your will to your soon to be ex-spouse. This rule also removes your ex-spouse as a beneficiary on your other non-testamentary property, such as life insurance and IRAs. So, while it is very valuable to update your estate planning documents after a divorce, the law has some protections in place so that, should you fail to update your documents, you won’t end up with your ex-spouse inheriting all your property. However, the court must finalize the divorce for the revocation by divorce rule to go into effect. Should one spouse die before the divorce proceeding are finished, this rule does not come into play, and peculiar results can occur. The first result is that, most likely, there will be no divorce. The divorce court will feel like there is no longer an outstanding issue, and the case is over. It does not matter that there were major issues of property division and guardianship still outstanding; in most cases the divorce court will give up jurisdiction and close the case. Once the divorce court gives up the case, the way property is distributed will depend on the probate court, and how much estate planning was completed.
Situation 1- No Will
If a party in a divorce action dies without a will, then their ex-spouse can inherit all of their property. In dealing with parties involved in a nasty divorce, having their ex wind up with everything might be the thing they want least in the world. The reason for this outcome is that, if you have no will, the probate court divides your property according to your state’s intestacy laws.
New Jersey
Under the NJ intestacy laws, your spouse receives all of your probate property under two circumstances: 1. you have no surviving parents or descendants, or 2. you do have surviving descendants, who are also the descendants of your surviving spouse, and your surviving spouse has no descendants from an outside relationship. If there are no children outside the relationship on either side, you have no children together, and you predecease your parents, then your spouse receives the first $50,000-$200,000, depending on the size of the estate, and then three quarters of the balance. If either you or your spouse has children outside of the relationship, then your spouse receives the first $50,000-$200,000, depending on the size of the estate, and then half of the balance. If you have no surviving spouse, then your estate goes to your children and grandchildren, if you don’t have surviving descendants then the estate goes to your surviving parents and if no surviving parents, the estate goes to their descendants, e.g. your siblings, nieces nephews, etc., and so on.
New York
Under NY intestacy laws, if you have a spouse but no children, your spouse gets everything, if you have a spouse and children, your spouse gets the first $50,000 of the estate and half the balance, with your children receiving the rest. If you have no surviving spouse, the entire estate goes to your children, if no surviving children then to your parents, if no surviving parents then to your siblings, and so on.
It is important to note that intestacy laws only apply to property that would have passed through a will. If you have accounts with beneficiaries, trusts, jointly owned property, pensions, life insurance, retirement accounts, etc. this property transfers automatically under the terms of the instrument, and the intestacy laws do not affect them. If your spouse was your beneficiary/co-owner for this property, and you did not change your beneficiary designations on these accounts, or how property is titled, all of this property goes directly to your spouse. When a party files a divorce summons, there are automatic orders that say that, while the divorce case is pending, neither party may make changes to the beneficiaries of their estate or life insurance without consent of the other spouse or without a court order. If you work with an estate planning attorney once you start your divorce, they can work with you to, as much as is legally allowed, to change your beneficiary designations, retitle your property and set up trusts. By doing this, they can ensure that your estate can avoid probate, which is expensive, time consuming and public. As an added benefit, should something happen to you during the divorce proceeding, this property will not go to your soon to be ex-spouse.
Situation 2- Will From Before the Marriage
Another situation that can occur is that the deceased party had a will, but did not update it when the divorce proceeding began. If the will was written before the marriage took place, the soon to be ex-spouse is called pretermitted, that is, omitted because the testator didn’t know to include them when the will was written. In New York, the pretermitted spouse is able to take the elective share as if the decedent disinherited them. In New Jersey, the pretermitted spouse is entitled to a share of the estate equal to the amount they would receive if the testator died without a will. So, in NJ the outcome will be the same as in Situation 1 above. In NY however, the surviving spouse can make a spousal election, and take the greater of $50,000 or one third of the total adjusted estate. The total augmented estate does not just include the probate property of the estate; it will also include all of the testamentary substitutes mentioned in the situation 1 analysis, with the exception of life insurance. In this case, even if you changed your beneficiary designations and retitled your property, your spouse will still be able to obtain these funds through the spousal election.
Situation 3- Will From During the Marriage
If the will wasn’t updated once the divorce proceeding started, but still includes the soon to be ex-spouse, then there is yet another outcome. The surviving spouse will still have the ability to make a spousal election. In NJ, the spouse’s elective share is one third of the augmented estate. If this is not an issue then the executor, who is often the surviving spouse, will submit the will to probate and the court will direct the executor to distribute the decedent’s property as listed in the will.
Situation 4- Will Created During the Divorce
If you completely remove your soon to be ex-spouse from your will when the divorce proceeding starts then if you die before the court enters a judgment of divorce, then your spouse will be allowed to make a spousal election and take an elective share. In NJ this is one third of the augmented estate; in NY it is the greater of $50,000 or one third of the adjusted estate. The augmented estate in NJ is much less generous to the surviving spouse than the adjusted estate in NY. While NY meant its rule to include all of the non-probate assets that the decedent has, the NJ augmented estate adds back in assets that the decedent gifted away in the two years immediately preceding death. The augmented estate also includes assets that are not part of the estate, but that the decedent still had control over, such as revocable trusts, jointly held property, assets over which the decedent had a power of appointment. The other part of the NJ law that makes it less generous is that the court takes the into account the assets of the couple, and then counts the assets of the surviving spouse, whether acquired independently or through the marriage, and counts them towards the one third of the augmented estate. In other words, the surviving spouse’s elective share will be paid, as much as possible, from the surviving spouse’s own assets. In NJ, the spousal election is not meant to prevent disinheritance, but rather to provide continuing support if needed.
If you pass away during a divorce proceeding, and the court still considers your ex-spouse to be your “surviving spouse”, there are a wide range of possible outcomes. Assuming that your goal is to minimize the amount that your ex-spouse will inherit, you will probably want to create a new will. With a new will that cuts out your ex-spouse, they will be limited to the elective share, which is one third of the augmented estate. If you don’t have a will, the intestate share given to the surviving spouse can be much higher, depending on how much non probate property you have.
Avoiding the Surviving Spouse Label
In New Jersey
If you want to avoid having a soon to be ex-spouse should you die before the court enters a judgment of divorce, you need to end that party’s classification as the surviving spouse. In NJ, the elective share statute provides three grounds to disqualify the surviving spouse.
If the decedent and the surviving spouse were living separate and apart at the time of death;
If the decedent and the surviving spouse had ceased to cohabit as man and wife, either as a result of a Judgment of Divorce from bed and board; or
If the decedent and the surviving spouse lived together under circumstances which would have given rise to a cause of action for divorce or nullity prior to the decedent's death.
New Jersey courts have ruled on this issue twice[1], and both times they have interpreted it pretty narrowly. In short, these courts have decided that basically, the first of these grounds did not have any power on its own, and to disqualify the surviving spouse, there had to be adequate grounds for a divorce, though the decedent did not have to actually have begun divorce proceedings. An interesting thought, outside the scope of this article, is whether a court could disqualify someone as a surviving spouse if their spouse lived separately in a nursing home for a period long enough to qualify them for a no-fault divorce, as this would satisfy the court’s narrow reading.
The result of the elective share statute in NJ when a party dies during a divorce is that the surviving party cannot make a spousal election as a surviving spouse. The terms of the elective share statute disqualifies them. As a result, the divorce action is extinguished by the death of a party, so the surviving party cannot get equitable distribution through divorce law, and the surviving party is disqualified as a surviving spouse, so, if they were disinherited, they cannot make a spousal election. In cases where the surviving party is completely cutout, both through divorce law and the law of estates, the court will often find a way to avoid such an inequitable result. A court could grant a divorce retroactively, but more often they will award relief under quasi-contract through the creation of a constructive trust.
In New York
It is a bit more difficult to disqualify someone as a surviving spouse in NY. If you have a valid decree or judgment of separation, that will disqualify the surviving party from being considered to be the surviving spouse. Outside of a valid divorce or separation decree, the most common way to disqualify the surviving party from surviving spouse status is a finding of abandonment. Abandonment is difficult to establish, and is very fact-specific. Filing for divorce is not in and of itself abandonment. If the deceased spouse was the one who left the surviving spouse, then an abandonment claim will not go through. Similarly, if the decedent threw out the surviving spouse, or if they left with mutual consent, or if there was a legitimate reason to leave, such as abuse, then the abandonment claim will not go through. Finally, because these are very fact-specific claims, and one of the parties cannot testify, proof can be difficult to come by.
Timing issues
Another issue that effects the eventual distribution of assets when a party dies during a divorce proceeding is how far along the divorce proceeding is. Generally, when one party in a divorce proceeding dies, the purpose of the proceeding- to end the marriage- is accomplished and the divorce court loses jurisdiction over the case and the marital property. When the divorce action abates, the court cannot grant a decree, or award relief that would be dependent on a divorce, such as property division and maintenance. As a result, the decedent’s property gets divided in accordance with the law of decedents’ estates. As we have shown, there can be a major difference between equitable distribution from a divorce court, and distribution of an estate based on probate or intestacy law.
Because the differences can be so substantial, courts will often look for exceptions to the general rule that the divorce action abates upon the death of one of the spouses. One of these exceptions is a case where there is a decision rendered granting a divorce, and the party seeking a divorce was entitled to a judgment while both parties were still alive. In this case, the court can enter a retroactive judgment, nunc pro tunc, that takes effect at a time prior to the spouse’s death. Another general exception occurs when the parties have already signed a stipulation of settlement. The court will treat the stipulation as a binding contract and will apply it against the deceased spouse’s estate. Another exception is where the divorce judge grants the divorce, but there are still issues outstanding, so the court has not yet entered a judgement. In this case, the grant of divorce prior to death allows the court to deem the right to equitable distribution as vested. The court can then substitute the estate of the decedent for the deceased spouse. As there are then two live parties again, the court can enter the divorce judgement and order equitable distribution.
There is also the possibility that a court could decide that the literal application of the law would be absurd and construe the statute to avoid the absurdity[2]. In this case the court could provide a retroactive divorce[3] or award an intestate share to the decedent’s children under a theory of quasi contract or constructive trust. Cases were a court find the literal application to lead to absurdity are very rare, and involve significant litigation.
Conclusion
A death during a divorce proceeding is an interesting area where family and estate law meet. If a party entering into a divorce does not plan, they can run into significant unintended consequences, including a “worst case” scenario where the person you intend to divorce winds up inheriting all of your assets. Depending on the planning that you have completed, there are a wide range of outcomes that could occur. One step that a divorcing party should take immediately upon filing for divorce is to get a new will created. The reason for this is that intestacy laws often gives everything to a surviving spouse, as do the wills of married people. If you get a new will, you likely will be unable to completely disinherit your soon to be ex-spouse, but you will significantly lower the percentage they would receive, should something happen to you during the divorce proceedings. You will also determine what beneficiary designations you will need to change when the automatic orders preventing such adjustments are over.
[1] Estate of Louis McKay, Deceased, 205 N.J. Super. 609 (Ch. Div. 1984), Estate of Herbert J-fersh, 195 N.J Super. 74 (App.Div.1984)
[2] see e.g. Di Bella, 372 N.J. at 584
[3] Fulton v. Fulton, 204 N.J. Super 544,550 ( Ch. Div. 1985)