Eddie and Aidaliz Jones married in 1998. They had a child in 2003, and were later divorced in 2009. When Eddie died, he was survived by his minor child as well as an emancipated adult child from a prior relationship.

Before the marriage, Eddie Jones enrolled under a group life insurance policy through the Police and Firemen’s Retirement System of New Jersey, naming his parents as beneficiaries and Aidaliz as the contingent beneficiary. When they divorced, Eddie and Aidaliz entered into a settlement agreement, later incorporated into their Amended Dual Final Judgment of Divorce, which made the following provision with respect to the life insurance policy:

5. 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.

Eddie died intestate, and Aidaliz and his adult son were named co-administrators of the estate.

At the time of his death, Eddie 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language) had predeceased Eddie, and Aidaliz’s designation as contingent beneficiary under the original policy language was revoked upon their divorce, pursuant to N.J.S.A. 3B:3-14.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.

Aidaliz 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 chancery judge found that the current value of the policy was $160,002.09, and that Aideliz’s outstanding alimony of $10,400 would be paid from the policy to satisfy that amount. The judge ordered that the remaining proceeds be paid to Aidaliz, as trustee for the minor child. In so doing, she 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. As the appellate court explained, pursuant to Flanigan v. Munson, 175 N.J. 597 (2003), “[w]hen 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.

Id. Here, the Appellate Division noted that the Flanigan test had been met. 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 policy proceeds.        

A copy of In re Estate of Jones can be found here –   Matter of the Estate of Jones

For additional information concerning estate planning and administration, visit: