It is generally recognized in legal practice that various support obligations, such as alimony and child support, terminate upon the happening of specific circumstances, one of which is the death of the payor. Federal tax regulations also require that payments need to terminate once the payor is deceased. Furthermore, New Jersey statute, N.J.S.A. 2A:34-25 dictates that alimony shall terminate upon the death of the payor spouse.
However, in the last 50 years, there has been a conflict with figuring out how to deal with the financial implications a payor’s death has on a former spouse and the children who are still dependent on said support. In order to secure that dependence, what is now referred to as “alimony insurance” has been become a popular security blanket to ensure the support is still available should circumstances require it.
The New Jersey Supreme Court in Grotsky v. Grotsky, 58 N.J. 354 (1971) applied the language of N.J.S.A. 2A:34-23 alimony and child support orders by ruling on child support, the Courts followed precedent with reference to alimony in the case of Meerwarth v. Meerwarch, 128 N.J. Super. 285 (Ch. Div. 1974), aff’d 137 N.J. Super. 66 (App. Div. 1975), aff’d 71 N.J. 541 (1976). After being affirmed by the Appellate Division and the Supreme Court, the Supreme Court noted that under appropriate circumstances, and for good cause, a court could order a divorced husband to cooperate in obtaining insurance on his life for the financial protection of his former wife and his children, citing to the “reasonable security” provision of N.J.S.A. 2A:34-23.
Furthermore, in the case of Davis v. Davis, 184 N.J. Super. 430 (App. Div. 1982), The Appellate Division affirmed an order of the trial court which required the payor to obtain life insurance on his life [or create a trust fund] for the benefit of his former spouse to “provide some measure of security… for the payment of alimony in the event of [payor’s] death”, noting that equity showed the need for some relief given the former wife’s risky financial position, lack of equitable distribution, poor health, inability to work, and other relevant factors.
In 1988, N.J.S.A. 2A:34-23 was enacted providing that: “Nothing in this act shall be construed to prohibit a court from ordering either spouse or partner to maintain life insurance for the protection of the former spouse, partner, or the children of the marriage or civil union in the event of the payor spouse’s or partner’s death.” It is widely accepted that the Court’s authority to require the maintenance of life insurance is discretionary, but practically speaking, in divorce cases where there is an alimony and/or child support obligation, most agreements include some sort of life insurance requirement or other means to “secure” that support in the event of a payor’s death, namely, life insurance.
The Purpose of Support Orders & Life Insurance
One of the fundamental objectives of support orders is to give families the opportunity to attempt to maintain their marital lifestyle after a divorce, and to hopefully minimize a divorce’s impact upon the family, specifically the children. However, in circumstances like these, whether a person qualifies for life insurance, and the cost, is largely a result of the insured’s age, health, and the like.
When these factors create issues, Courts have decided to expand the scope of the remedies they can use to make this form of security available. The Court in Davis had afforded the payor spouse the option of establishing a trust fund instead of obtaining life insurance. After interpreting the various statutory provisions, the Supreme Court in Jacobitti v. Jacobitti 135 N.J. 575 (1994) affirmed the establishment and use of trusts to secure support after the death of the payor. Courts have even gone so far as to impose constructive trusts on other assets or benefits that a payor has (Sedarous v. Sedarous, 285 N.J. Super. 316 (App. Div. 1995)) or have even made a payor elect their former spouse as a survivor to their pension benefits (White v. White, 284 N.J. Super. 300 (Ch. Div. 1994), aff’d 309 N.J. Super. 139 (App. Div. 1996)). If a payor spouse failed to maintain the life insurance or any other form of Court mandated security at the time of their death, the deceased spouse’s estate may be subject to liability to the former spouse for the amount he/she had failed to maintain (Flicker vs. Chenitz, 55 N.J. Super. 273 (App. Div. 1959); Maquiling v. Maquiling Estate, 211 N.J. Super. 69 (Law Div. 1986); Della Terza v. Estate of Della Terza, 276 N.J. Super. 46 (App. Div. 1994)).
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