Constructive Trusts for Life Insurance Policy Proceeds

In the Matter of The Estate of Eddie Jones, III (App. Div. 8/26/2015), the Appellate Division affirmed a Burlington County Superior Court decision imposing a constructive trust upon the decedent’s life insurance policy proceeds by reforming the policy to enforce the terms of a settlement agreement that was incorporated into the decedent’s Amended Dual Final Judgment of Divorce, wherein the decedent agreed to maintain life insurance for the benefit of the decedent’s un-emancipated child and to secure the decedent’s alimony obligation.  In the decision, the Appellate Division cited to Flanigan v. Munson, 175 N.J. 597, 608 (2003), which acknowledged the authority of courts to impose a constructive trust to prevent unjust enrichment and force restitution in equity and good conscience.  The Appellate Decision used the two-prong test set forth in Flanigan to impose a constructive trust on decedent’s life insurance policy proceeds:  1) a party has committed a wrongful act; and 2) the wrongful act must result in a transfer or diversion of property that unjustly enriches the recipient.