Why Is Life Insurance Required For Alimony In A New Jersey Divorce?

Life Insurance is used to protect the former spouse who is receiving alimony in the case of the premature death of the paying spouse. Many times the amount of life insurance may be reduced at a agreed upon age when your attorney drafts your Matrimonial Settlement Agreement. The following case shows why it is very important to hire an experienced lawyer who only practices divorce law here in the state of New Jersey.

In Stenger v. Stenger, the parties were married in 1986. The parties had four children born of the marriage. All four children are emancipated, meaning they are legally recognized as adults. During the marriage, the ex-husband worked at the ex-wife’s father’s business, F.A. Bonauto and Associates (“FABA”). The ex-wife’s brother also worked at FABA. The ex-husband and the ex-wife’s brother formed their own business, National Association Services, Inc. (“NAS”), in 1986. NAS provided insurance services to the public. In 2004, the ex-wife filed for divorce. The ex-wife hired a forensic accountant to evaluate NAS’s business value at that time.

The parties entered into a property settlement agreement (“PSA”) in 2005. A PSA is a contract agreed to by the parties that determines the division of the parties’ marital assets. The parties’ PSA settled all unresolved issues. Specifically, the PSA stated that the ex-husband was to pay the ex-wife $162,000 per year in permanent alimony. The ex-husband’s alimony obligation would end upon either party’s death or the ex-wife’s remarriage. The ex-husband was also obligated to maintain a life insurance policy, which named the ex-wife as the beneficiary, in the amount of one million dollars. The PSA also stated that the insurance policy obligation would be renegotiated when the ex-husband reached the age of sixty-two. Furthermore, the PSA allowed the ex-husband to solely keep his NAS business interest, and required that the ex-husband pay quarterly payments to the ex-wife in the amount of $800,000 plus interest. A final judgment of divorce was entered on March 31, 2005 and incorporated the parties’ PSA.

NAS was sold to another corporation, BenefitMall Holdings, Inc. (“BenefitMall”), in March 2010 for $10.2 million. The ex-husband received half of the proceeds, totaling $5.1 million. The ex-husband worked as the business development director for BenefitMall beginning in 2010. In 2010, the ex-husband earned $203,733, and in 2011, the ex-husband earned $143,396. In 2012, the ex-husband earned $73,485 as the business development director for BenefitMall. The ex-husband retired at age sixty-one and moved to Florida. The ex-wife sold the former marital home in 2013 for $875,000. She then purchased a smaller home for $640,000. The ex-wife worked at a retail store part-time and earned $11,440 in 2013. In 2014, the ex-wife earned $15,826.

The ex-husband filed a motion with the Superior Court of New Jersey Family Part in 2015 to modify or terminate his alimony and life insurance policy obligations. The court can modify an alimony obligation if the person filing the motion shows that there has been a change in circumstance. The ex-husband based his motion for modification on the fact that he had retired, which can be considered a change in circumstances. The ex-wife opposed the ex-husband’s motion with a cross-motion and asked the court to enforce the one million dollar life insurance policy. The judge denied the ex-husband’s motion to modify or terminate the ex-husband’s alimony and life insurance obligations on June 30, 2015. The judge also denied the ex-wife’s cross-motion and tried to encourage the ex-husband and ex-wife to agree to reduce the life insurance policy obligation amount.

The ex-husband filed a motion with the court for reconsideration of his request to modify alimony. The ex-husband also requested a plenary hearing, which happens when significant facts of a case are in disagreement and the parties’ testimony is needed to decide such matters. The judge denied the ex-husband’s motion on November 20, 2015. The ex-husband then appealed the court’s decision.

On appeal, the ex-husband argued that the judge was wrong to deny his motion for reconsideration and a plenary hearing because he demonstrated a change in circumstances and that the parties disagreed on material facts. The ex-husband also argued that he was unable to continue with his monthly alimony payments since his retirement, and that the ex-wife no longer needs such high monthly payments. Lastly, the ex-husband argued that the PSA addressed his retirement at age sixty-two.

The New Jersey Appellate Division stated that the decision of the trial court is binding unless there is a showing that there was not substantial or credible evidence. The Appellate Division further explained that it gives deference to the trial court’s factual findings because of its expertise with such issues, unless giving deference would result in a clear injustice. The court explained that a motion for reconsideration is reviewed under an abuse of discretion standard, which occurs when a trial judge’s decision is made irrationally or goes against traditional policies. The Appellate Division noted that the lower court found that the ex-husband’s claims regarding alimony and the life insurance policy obligation in the PSA were separate issues. The Appellate Division stated that contract laws control a PSA. The court reasoned that the language of the parties’ PSA is clear that the life insurance policy was to be reevaluated when the ex-husband turned sixty-two because the policy premium was to increase at that time. However, the Appellate Division found that the PSA did not address whether alimony was to be renegotiated when the ex-husband turned sixty-two.

Furthermore, the Appellate Division noted that the lower court found that the ex-husband sold NAS voluntarily in 2010, and that his income in the following years was greater than expected and described in the PSA. The Appellate Division agreed with the trial court that a plenary hearing was unnecessary because a showing of changed circumstances must be made before a plenary hearing, not during, and the ex-husband failed to provide documentation to support his position. Additionally, the Appellate Division disagreed with the ex-husband that his ability to pay alimony should be based solely on his current income and not include the proceeds from the sale of his business. The Appellate Division reasoned that there is no suggestion in the PSA indicating that the parties planned to disregard the ex-husband’s proceeds from the sale of his business in calculating alimony.

Ultimately, the Appellate Division agreed with the lower court and held that there should be no modification of alimony and that the parties should consider reducing the ex-husband’s life insurance policy obligation.