1/12/2017

Death and Divorce: What Happens to Your Estate During and After the Divorce Process?

Many people ask what happens to their estate if they die: (1) while the divorce is pending; or (2) after the divorce is complete. According to New Jersey law, all spousal designations are revoked if the death occurs after the divorce. However, this is not the case if the death occurs while the divorce is pending. For this reason, you should assess your estate plans as soon you decide you are moving forward with a divorce.

New Jersey Law - After the divorce

After you receive your Judgment of Divorce (which finalizes your divorce process), there are three areas that require your attention.

1. Your Last Will and Testament.

Your Will identifies your beneficiaries. It also designates your executor, who is the person who will administer your estate. Ordinarily, your spouse is designated as the executor and is the beneficiary of most, if not all, of your estate. New Jersey law revokes spousal designations after a divorce. In other words, if your Will is left unchanged, your assets are disbursed as if your spouse was never in the Will. However, you do not want to rely on that law to ensure that your former spouse does not receive any or all of your property. To ensure this, you must revoke all former Wills and execute a new Will identifying those who you wish to inherit your estate. You must also designate a new executor. This should be someone you trust to administer your estate on your behalf in the event of your death. If you have minor children, you could also address guardianship of your children in the event of your death. Bear in mind, however, unless your spouse is deemed an unfit parent, he/she will likely receive custody of any children of your marriage.

In rare cases, someone may wish to still have their ex-spouse remain in their Will even after the divorce. If that’s the case, you must still draft a new Will after the date of Divorce to ensure your ex-spouse isn’t revoked from the Will in the event of your death.

2. Insurance Policies, Retirement accounts and other Financial Accounts

After you divorce, you must check and confirm the beneficiary designations for your insurance policies, retirement accounts, 401Ks and any other financial accounts you may have. Certain ERISA-governed plans require that the Plan Administrator pay the beneficiary named in the beneficiary designation statement, regardless of state law or what is in your Marital Settlement Agreement. If you fail to remove your spouse as the beneficiary, payments may be delayed while the beneficiary designation is challenged. Because of this, you must be certain to contact all of your financial institutions immediately after you receive your Judgment of Divorce and sign new beneficiary designations that effectuate your wishes.

3. Powers of Attorneys

Finally, if you have executed any Powers of Attorney (for medical or financial reasons) and have designated your spouse as your fiduciary, you must revoke those and execute new ones that reflect your current intentions.

New Jersey Law – Pending the Divorce

If you were to die after filing your Complaint for Divorce and before your divorce is finalized, you can’t assume that the divorce is over and the other spouse immediately inherits the estate. In these circumstances, the distribution of your estate is governed by the case of Carr v. Carr, 120 N.J. 330 (1990). In this case, the court explored the issue of when a spouse dies mid-divorce. The court held that New Jersey statutes governing the division of assets did not apply because a Judgment of Divorce hadn’t yet been entered. Furthermore, the elective-share laws (laws that provide the spouse with a minimum share of the estate in the event of the other spouse’s death) also do not apply because the divorce process was initiated. In these types of cases, a “constructive trust” should be created by the court. Unlike a typical trust, a constructive trust is not based on the actual intention of the parties. Rather, it is an “equitable” remedy afforded by the court to prevent one person from being enriched at the expense of another in situations that the law considers unjust (i.e., “unjust enrichment”).

What happens when a spouse revises his/her Will in the midst of the divorce process? Our courts addressed this issue in the unpublished Appellate Division decision of O’Hara v. Estate of John B. O’Hara, Jr. (February 26, 2016). In that case, the court relied on Carr in that the Wife was still entitled to a share of the Husband’s estate. However, before deciding the Wife’s share, the court needed to determine the value of the marital assets. In order to do that, the litigation needed to continue. Without moving forward with the litigation, the court could not effectively determine whether a constructive trust was appropriate.

Considering all of this, it is essential that you discuss your intentions and options with an experienced divorce attorney at Ruvolo Law Group. Without proper planning, your wishes cannot be achieved. For more information on properly planning for your future in the event of divorce, call our Morris and Bergen county offices at 973.993.9960.

Blog authored by Cindy Ball Wilson, Esq. and Melissa M. Ruvolo, Esq.