What is the Law In New Jersey When a Decedent Fails to Maintain Mandatory Life Insurance to Pay Alimony and Child Support?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate Probate and Litigation Attorney

A recent Appellate court case provides some strong guidance to estate representative(s) (executor, trustee, administrator) when life insurance is mandated in a judgement of divorce for the benefit of a surviving beneficiary and it either lapses or incorrectly names the mandatory beneficiary. In this case a couple married and had a child. They were later divorced. When the husband died, he was survived by his minor child as well as an emancipated adult child from a prior relationship.

Before the marriage, the decedent enrolled under a group life insurance policy through the police and firemen’s retirement system of New Jersey, naming his parents as beneficiaries and his ex-spouse as the contingent beneficiary. When they divorced, the couple entered into a settlement agreement, later incorporated into a Dual Final Judgment of Divorce, which made the following provision with respect to the life insurance policy:

LIFE INSURANCE – The Husband presently has life insurance on his life with a face amount of approximately $200,000.00. He shall name the minor child as beneficiary of $150,000.00 of that policy naming Wife as trustee. Husband shall continue this policy until the child is emancipated. Husband shall also maintain $50,000.00 of said policy naming Wife as beneficiary to secure his alimony obligation. This requirement for Husband to maintain life insurance naming Wife as beneficiary shall terminate upon the termination of alimony.

Husband died intestate (meaning without a Last Will) and his adult son was named administrator of the estate.

At the time of his death, he had not named his minor child as the beneficiary of the life insurance policy. His parents (the primary beneficiaries under the original policy language) had predeceased him and his ex-spouse as contingent beneficiary under the original policy language was revoked upon their divorce, pursuant to N.J.S.A. 3B:3-14. The policy provided that in the absence of a beneficiary, the policy proceeds would be payable to the insured’s estate.

The administrator sought an order distributing the insurance proceeds pursuant to the judgment of divorce. The chancery judge granted this relief, finding that the decedent’s failure to revise the beneficiary designation to secure his child support and alimony obligations did not defeat the judgment of divorce. The chancery judge reformed the policy accordingly.

The judge also ordered that the remaining proceeds be paid to the minor child’s mother as trustee for the minor child. In so doing, the judge noted that the child’s projected child support through emancipation would probably equal that amount; therefore, there would be no windfall to the child as a result of the order. The adult child appealed.

The Appellate Division affirmed and stated the following proposal, “when support is secured by a life insurance policy and the policy fails to provide such security because the policy names an incorrect beneficiary, the court may impose a constructive trust on all or a portion of the life insurance proceeds after the obligor’s death.” A constructive trust is warranted when the following two-prong test is satisfied:

First, a court must find that a party has committed “a wrongful act”. The act, however, need not be fraudulent to result in a constructive trust; a mere mistake is sufficient for these purposes. Second, the wrongful act must result in a transfer or diversion of property that unjustly enriches the recipient.

Here, the Appellate Division noted that the decedent’s failure to amend the policy beneficiary was a “wrongful act” that would result in the diversion of proceeds that would trump the property settlement agreement, and would constitute an unjust enrichment.

For these reasons, the Appellate Division concluded that the chancery judge’s reformation order was a proper exercise of her judicial authority to impose a constructive trust on the police proceeds.

This Appellate case affirming a similar outcome in a case I argued before the Appellate Division in 2010 which involved an estate that had significant life insurance and assets and where the decedent failed to name his minor child as beneficiary.

To discuss your NJ Estate Probate and Litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

Issues Arising Out of Life Insurance Policies and Beneficiaries

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate Planning and Probate Attorney

Gary and Sharon divorced in 1998.  Gary had two life insurance policies from Prudential and two from State Farm.  He also had a separate Met Life group term life policy. The judgment of divorce stated that Sharon was to remain the primary beneficiary of one third of the face value of all of his insurance policies.  They also agreed to designate the children as primary beneficiaries of all life insurance policies except for the Prudential and State Farm policies.

At the time of the divorce, Gary made Jeffrey and Christopher, the couple’s two adult sons, the primary beneficiaries under the two Prudential and one of the State Farm policies, leaving ex-wife Sharon as the beneficiary of the other state farm policy.

Gary’s son Christopher died unexpectedly.  In 2004, Gary married Donna. Once married to Donna, Gary removed Jeffrey and Christopher as beneficiaries of both Prudential policies and made Donna the primary beneficiary.  He designated Donna and Jeffrey as beneficiaries on one of the State Farm policies while ex-wife Sharon remained the beneficiary of the other State Farm policy.  Donna was designated as the only beneficiary of the Met Life Policy.

Once Gary passed, the proceeds of one State Farm policy were paid in full to ex-wife Sharon.  Donna and Jeffrey then filed legal claims for the two Prudential and the other State Farm policy.  The Met Life policy proceeds went to Donna.  Jeffrey argued that he was entitled to these proceeds as well.

The court had to decide the following issue: Whether the divorce decree’s obligation to name Jeffrey a beneficiary of Gary’s life insurance policy was temporary or permanent. The court reasoned that because there was no language limiting the duration of the beneficiary, the decree’s effect was permanent – Jeffrey was in fact a beneficiary.  After the court came to this decision, they ordered the parties to provide information to the court to determine how much of the benefits Jeffrey was entitled to receive.

What’s the bottom line here?  Divorce settlements are often not clear about many different things.  In this case, it was unclear about when the insured could change the beneficiaries under his existing life insurance policies.  The divorce paperwork also did not mention anything about what happens when one of the children die before the death of parent whose life insurance policy it is.

To make sure you don’t find yourself in a similar mess, make sure that if you become separated or divorced, all your important documents are reviewed and changed according to your new circumstances and goals.  Each state has different laws regarding these things, so each beneficiary designation must be specifically evaluated. Finally, the most obvious, but also the most important – always think twice about naming someone as a beneficiary of a life insurance policy.

To discuss your NJ Estate Planning and Probate Litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

Are Personal Injury Payments Included in Your Estate for Tax Purposes Under New Jersey’s Death Tax Laws?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate Administrate and Probate Attorney

In 2011 a decedent died with an estate of $1,000,000 which was closed out and all inheritance and estate taxes paid. The estate has been closed for 4 years, but recently her wrongful death claim case settled after a jury trial. A NJ Inheritance/Estate Tax Auditor informed the family that a certain portion of the settlement is taxable and the other portion is not. So the issue is whether the wrongful death portion of the jury verdict ($250,000) is subject to NJ Inheritance/Estate Tax. One commentator offered the opinion that pain and suffering, expenses of care, nursing, medical and hospital expenses, other charges incident to the injury, and funeral expenses are exempt while any amount recovered in excess of these expenses are included in the Estate Tax.

My take is that any sum recovered under the New Jersey Death Act as compensation for wrongful death of a decedent is not subject to the New Jersey Inheritance Tax except as provided below:

  1. Any sum recovered under the New Jersey Death Act representing damages sustained by a decedent between the date of injury and date of death, such as the expenses of care, nursing, medical attendance, hospital and other charges incident to the injury, including loss of earnings and pain and suffering are to be included in the decedent’s estate.
  2. Where an action is instituted under the New Jersey Death Act and terminates through the settlement by a compromise payment without designating the amount to be paid under each count, the amount which must be included in the inheritance tax return is an amount, to the extent recovered, which is equal to specific expenses related to the injury. These expenses are similar to those mentioned in sections 1. above and include funeral expenses, hospitalization and medical expenses, and other expenses incident to the injury. Any amount which is recovered in excess of these expenses is considered to be exempt from the taxable damage amount (for the decedent’s pain and suffering). Damages that go to the next of kin for loss of society, consortium or support are not subject to estate tax.

In cases like these interested parties should review the Settlement Agreement to see if the allocation of damages is “in sync” with the damages asked for in the complaint and can be supported. For example, if the damages under the Wrongful Death claim only comprised 25% of the total amount sought, but the Settlement Agreement allocated 75% of the amount to the Wrongful Death claim (to avoid paying death taxes on the Wrongful Death portion), you’re probably going to have a fight with NJ that the allocation was improper.

To discuss your NJ Estate Probate Administration matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

Who Gets My Pension When I Die?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate Planning Attorney

So you have just powered your way through a nasty divorce.  You bought out your ex-spouse’s share of the marital home, and he or she has hit the road.  You continue your full-time job that includes a pension you have been putting money towards all during your career.  Death comes to you unexpected, and your money is sitting in your pension fund to be distributed. After your divorce you had a will redone and executed stating your children get everything in the estate, including your pension benefits. Now that you’re dead here comes your ex-spouse.  He or she claims that the pension benefits are his or hers because you designated him or her as the beneficiary of your pension, despite executing a will that says otherwise.  The company gives the money to your ex-spouse, who is the last person you wanted that money to go to.


Sadly, the case above is seen far too often in divorce cases.  Pension plans are governed under federal law, and federal law provides no recourse for the federal courts to change a beneficiary after someone dies.  Federal courts have the power to do three things with pension plans: enforce the plan’s terms to give beneficiaries their money, recover benefits from a fiduciary who has breached his or her duty, or reform terms of the benefit plan that are contrary to federal law.  Courts have reformed plan terms if they are held to not conform with ERISA, and provide relief in cases of the misrepresentation of pension plan terms to beneficiaries and retaliation by employers in firing employees to prevent them and their beneficiaries from collecting pension benefits.  No court, however, has changed a beneficiary upon the decedent’s death.

Interestingly, many states have adopted laws that automatically terminated a former spouse’s share in the estate.  However, in 3 US Supreme Court cases, the Court has struck down each state law, holding in Kennedy v. Plan Adm’r for DuPont Sav. Inv. Plan that the plan administrator has a duty to follow the designated beneficiary of the pension plan, no matter if there is a conflicting designation in a will or even a waiver of benefits agreed to by a beneficiary in a divorce decree.  The Supreme Court has stated that it is the fiduciary’s duty that the pension plan holder to adhere to the plan’s requirements and follow the beneficiary designated, no matter if it was waived in a subsequent document.

So, as the cliché goes always be aware of where your money goes, and remember that a will or trust cannot control everything.  Make sure your pension benefit is going to the person you want. If you want benefits to go to a trust, indicate you want the benefits to go to the trust and not a living person.  Otherwise, your money will not go to the loved one it was intended for.

To discuss your NJ Estate Planning and Asset Protection matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

Undue Influence in a Husband-Wife Relationship Not Enough To Draw an Award of Counsel Fees for the Estate

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Probate Estate Litigation Attorney

Courts have historically been stubborn in awarding the winning side of a lawsuit counsel fees.  One limited situation where the court will award counsel fees is in the area of Probate Estate Litigation. With estate litigation becoming more and more commonplace, and the tort of undue influence becoming the central claim, the question remains if an estate can go after someone who unduly influenced a loved one in giving him or her more of the loved one’s money and property upon death.  In the case of the executor of an estate or trustee of a trust, to which they have a fiduciary duty to the estate, the New Jersey Supreme Court in a landmark case In re Niles stated that the estate can go after this person for payment of these fees if they commit tort (a tort is a legal wrong doing) of the undue influence.  The Supreme Court has ruled that an executor who is not an attorney but who acted in bad faith in administering the estate is responsible for the estate’s attorney’s fees because undue influence has been committed.  And in a Supreme Court case just released a few days ago, Innes v. Marzano-Lesnevich, a wife that takes advantage of a husband’s estate may but may not have to pay back attorney’s fees to the estate.

In Innes, Adrian Folcher married Bernice Tambascia-Folcher and executed a will giving Bernice some assets and his children his personal property.  Bernice then executed a deed giving Adrian a one half interest in her Cherry Hill home so it could pass to the children when he died.  But that was not to be.  Another deed was executed by Adrian changing the interest in the home to joint tenants with a right of survivorship, so if one of them died, that person’s one-half interest in the home would pass to the other person.  The deed was executed with her husband Adrian in the car, with the witnesses watching from the bank window and the notary notarizing the will in the car with Adrian.  In addition, new codicils to the will were executed by Adrian giving all his personal property and his estate to Bernice.

Adrian died in October of 2007.  Now owning all of Adrian’s property, Bernice immediately recorded the new deed giving her 100% ownership of the home and drained money from Adrian’s accounts.  Suspecting fraud, the lawyer representing the estate, directed the executrix not to probate the codicil.  Litigation followed, and the trial court awarded $397,309.19 in attorney’s fees and costs that Bernice was to reimburse the estate.  The court held that Bernice had a confidential relationship with Adrian, despite not being the executor of the estate, and there was proof of undue influence.  The Appellate Division affirmed the finding, stating that she was not a fiduciary of the estate, but should be treated as one to make the estate whole because of the relationship she had with Adrian.

The Supreme Court reversed both courts.  It made clear that the relationship of an executor or a trustee has with the estate is necessary to grant attorney’s fees, and a husband-wife relationship is not enough to confer a fiduciary status.  There may be a happy ending to this story, as the Supreme Court remanded to the trial court to reconsider the relief and award different equitable relief to make the estate whole, rejecting Bernice’s arguments that she did not commit fraud upon the estate.  We shall see.

To discuss your NJ Probate Estate matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.

The Elective Share Calculation in New Jersey – Does It Include Life Insurance Proceeds?

By Fredrick P. Niemann, Esq. of Hanlon Niemann Wright, a Freehold, NJ Estate and Probate Law Attorney

A question I often receive is whether a spouse can disinherit their spouse. A client wants their children, their favorite charity, their pet (see my video on dying with your pet HERE) to inherit their estate, but leave their spouse high and dry.  Whatever their reason, the simple answer to that question is “no”.  Under the laws of most states, upon death, a spouse may elect to disregard the will of their significant other and take their elective share of the estate.  In New Jersey, the elective share is considered 1/3 of the value of the assets within the estate.  And don’t think you can simply transfer your property by use of beneficiary designations (see my many blog posts on the use of beneficiary designation), as the courts have figured this trick out, and will return the value back into calculating the elective share.  But what makes up the estate for purposes of valuing the spouse’s elective share?  A recent case that came down from a nearby state helps clarify this matter a bit.

John Bays and Carole married in 2000, and had one son. In 2000, Carole obtained a life insurance policy and named her husband initially as the beneficiary.  She then obtained a second life insurance policy in 2001 that would give 80% to John and 20% to the son.  In September 2007, Carole executed a new will that largely disinherited John.  At the same time, she created two trusts, and changed the beneficiary of both policies to be the trusts.  She died one month later.  John then filed to renounce the 2007 will and obtain his elective share.  He then sought to have the life insurance included in the court’s calculation of the elective share.  The trial court granted his request, holding he did not consent to the change in beneficiary, making this a fraudulent transfer subject to being included as part of John’s elective share.

But the Court of Appeals and the Supreme Court reversed the trial court.  Unlike fraudulent schemes where real estate is purchased with the decedent’s funds in the name of a 3rd person or money is transferred into a joint account with a third party, changing a beneficiary of a life insurance policy is not fraudulent.  In order for something to be a part of an estate, it must have belonged at some point to the dead spouse during her lifetime.  Life insurance proceeds, it held, do not fall into this category.  John’s interest in the property was at most provisional, and Carole had an “absolute right” to change the beneficiary.  Carole never owned the proceeds, so John’s interest could never attach to the proceeds.  One of the policies contained an acceleration clause that Carole could use to convert to cash, and the court held that created no interest for John in the property, as John could not force her to use it for his share.  Because John truly never had an interest in the property, it could not be a part of the elective share.

So what does this mean?  You can only take an elective share on property that was owned by the spouse, and the doctrine of using fraudulent transfers to calculate the elective share only applies to property within the spouse’s control, with life insurance not within that realm.  One more thing to note.  The Court affirmed the idea of changing a beneficiary of life insurance an “absolute right.”  We have yet another case of making sure you know who your beneficiaries of life insurance and pension plans are.  We saw how the courts will not reform a beneficiary after death despite a divorce, and now we see a court saying the husband is not entitled to life insurance as a part of his elective share because he is not a named beneficiary.

To discuss your NJ Estate Planning or Probate Litigation matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.