NJ Supreme Court Holds That The Estate Of A Deceased Spouse May Assert Equitable Claims Against Surviving Spouse

This recent case involves the intersection of estate law and family law. In Kay v. Kay, 405 N.J. Super 278 (App. Div. 2009), aff’d, ____ N.J. ___ (2010), the New Jersey Supreme Court, in a per curium or unanimous decision by the entire court, affirmed an Appellate Division decision holding that the estate of a deceased spouse may assert equitable claims of unjust enrichment and constructive trust against the surviving spouse when the deceased spouse was pursuing a claim of diversion of marital assets against the surviving spouse in a divorce litigation pending at the time of the deceased spouse’s death.

Hildegard and George Kay were married in 1973. It was a second marriage for both parties. Although no children were born of the marriage, each party had children from the prior marriage. In 2006, when she was 70 years old, Mrs. Kay filed a complaint for divorce. At that time, Mr. Kay was 83 years old.

In 2007, the court entered an order prohibiting the dissipation of marital assets. Thereafter, Mr. Kay claimed that his wife diverted marital assets into her sole name. But before the divorce action and the claims of the diversion of assets could be tried, Mr. Kay died.

Mr. Kay’s will left his estate to family members other than his wife. However, after Mr. Kay died Mrs. Kay dismissed the divorce action and transferred all joint assets she owned with her deceased husband into her sole name. After the transfer, Mr. Kay’s estate did not own sufficient assets to cover his burial expenses and attorney’s fees. As a result, the executor of Mr. Kay’s estate sought to file equitable claims seeking the imposition of a constructive trust to prevent the unjust enrichment that would occur if Mrs. Kay retained marital property belonging to Mr. Kay at the time of his death.

The trial court denied the estate leave to file equitable claims against Mrs. Kay, and dismissed the divorce action. The court held that the estate of a decedent spouse is not entitled to assert equitable claims against the surviving spouse based upon settled law. The estate appealed. The Appellate Division concluded that the trial court should have allowed the estate to assert claims against the surviving spouse and considered whether the equities arising from the facts alleged called for relief in favor of the estate.

The surviving spouse’s petition for certification to the N.J. Supreme Court was granted. The Supreme Court held that a trial court may not refuse to consider equitable claims raised by the estate of a deceased spouse who, during the divorce litigation, was attempting to pursue a claim that the surviving spouse had diverted marital assets. The Court held that, since the deceased spouse himself was, before he died, attempting to pursue claims that marital assets had been wrongfully diverted by the surviving spouse to the detriment of the deceased spouse, the estate’s attempt to continue the claims raised before death should not be extinguished.

The case is annexed here – Hildegard Kay v. George Kay