The New Hampshire Supreme Court recently issued an interesting opinion in the matter of Elter-Nodvin v. Nodvin. It is not a traditional family law case, ie divorce or parenting, but rather a constructive trust matter. Nevertheless, the holding has ramifications in the family division.
Husband files for divorce from wife. Family court issues an anti-hypothecation order, which restrains the parties “from selling, transferring, encumbering, hypothecating, concealing or in any other manner whatsoever disposing of any property, real or personal, belonging to either or both of them.” While divorce is pending, husband changes his beneficiary on his life insurance and retirement accounts from Wife to their children. Husband dies before divorce is accomplished. Wife sues children in Superior Court seeking to impose a constructive trust to recover the proceeds from the life insurance and retirement accounts. Superior Court dismisses wife’s claims against children.
The wife appealed the trial court’s decision dismissing her petition, arguing that the husband’s change in beneficiaries from wife to children violated the anti-hypothecation order and required the imposition of a constructive trust in favor of the wife over the proceeds. The wife also argues that the husband violated the order when he changed beneficiaries because those actions hindered the trial court’s ability to distribute the assets according to the purpose of the anti-hypothecation order.
The court holding is interesting, and contrary to the conventional wisdom that changing beneficiaries on insurance or retirement accounts violated the anti-hypothecation order. Instead, the Supreme Court declared that the plain language of the anti-hypothecation order that required the parties to refrain from disposing of property allowed the husband to make the changes to the beneficiaries, and in no way impeded the family division from making an order requiring the husband to name the wife as beneficiary. The Supreme Court reasoned that the wife did not possess a vested property interest, and absent a property interest, there could be no violation of the order. Therefore, the wife could not base the imposition of a constructive trust on the alleged violation of the anti-hypothecation order.
At a temporary hearing, or in a temporary agreement, it is important to secure an order that each party shall name the other as the beneficiary on their existing life insurance, retirement plans, and/or survivor benefits and shall make no changes to those designations while the divorce is pending.