Death & Divorce Part 3 – Lump-Sum Alimony and Attorney’s Fees
As if getting a divorce weren’t difficult enough, what happens when one spouse dies before the divorce becomes final? Part 1 of this series of articles addresses what happens when the deceased spouse died without a Will or Trust. Part 2 covers situations in which there was a Will and Trust. Part 3 covers how to handle lump-sum spousal support (alimony) and attorney’s fees pertaining the divorce after one spouse dies.
Unlike most states that abate or stop the case if a spouse dies during divorce, New Mexico law says the divorce continues as though the spouse had not died, substituting the Personal Representative of the estate of the deceased spouse as the party in the divorce litigation.
In 2012, the New Mexico Court of Appeals issued its ruling in the Estate of Peter Nauert v. Morgan-Nauert. In that case, Husband filed a divorce petition in March 2006. He subsequently died and the Divorce Court continued the proceeding pursuant to the domestic relations anti-abatement statute, Section 40-4-20(B), with Husband’s estate substituted as the Petitioner in the divorce case. In September 2007, the personal representative of Husband’s estate opened up an informal probate action in the Probate Court to administer the estate.
In November 2007, Wife filed a motion for interim spousal support and award of attorney fees and costs in the Divorce Court. At a status conference on Wife’s motion, Husband’s estate argued that any spousal support, attorney fees, or costs would be Class Six claims under the Probate Code’s classification of creditors’ claims, and informed the Court that the estate may not have sufficient assets to pay the Class One through Five claims. At the hearing on Wife’s motion, the Divorce Court orally awarded Wife monthly spousal support beginning September 2007 plus attorney fees, and determined that the attorney fees were a Class One claim under the Probate Code.
In March 2009, the Divorce Court entered another order awarding Wife monthly spousal support and attorney fees from September 2007 forward, ordered both awards to be treated as Class One claims under the Probate Code, and required the Estate to pay both awards immediately. The Estate did not pay the awards and instead filed an extraordinary writ in the NM Supreme Court, arguing that the Divorce Court’s classification of spousal support and attorney fee awards usurped the authority of the Probate Court. The Supreme Court denied the writ without comment on the merits of the argument.
After the writ failed, the Estate filed a petition in the Probate Court seeking guidance on the classification of spousal support and attorney fee awards under the Probate Code. The Estate also released funds to Wife to avoid being held in contempt of court for refusing to pay spousal support and attorney fees per the May 2009 order in the Divorce Court. In August 2009, the Probate Court ruled that spousal support and attorney fees awards were not Class One but Class Six claims under the Probate Code.
Meanwhile, the Divorce Court held the property division hearing in the divorce case in late November / early December 2009. The Divorce Court entered its findings of fact and conclusions of law in February 2010 pursuant to which it required the Estate to pay immediately a lump-sum spousal support award based on a monthly amount from August 2007 through August 2010 and all of Wife’s attorney fees in the divorce case. The Divorce Court reasoned that Section 40-4-20(B) of the domestic relations statutes required it to determine all financial issues relating to the divorce, including spousal support and attorney fees, before the remaining assets could be treated as the probate estate that would be passed on to the Probate Court for further action. Of note, the Divorce Court decided that its award of spousal support and attorney fees were not part of the probate estate and therefore out of the jurisdiction of the Probate Court. This reasoning was upheld by the Court of Appeals, which means it didn’t matter whether spousal support or attorney fees in the divorce case were Class One or Class Six claims under the Probate Code; they simply weren’t part of Husband’s probate estate and needed to be paid first. The Court of Appeals also decided that the Divorce Court’s order awarding spousal support and attorney fees could properly be characterized as part of the Divorce Court’s power to enforce its own orders as part of the “proceedings” Section 40-4-20(B) mandates a court to “conclude” as though both spouses survived.
The Court of Appeals further ruled that the Divorce Court’s order requiring the Estate to immediately pay spousal support and attorney fees did not violate the Federal Insolvency Act because such awards are not claims against the Estate and, therefore, the Federal Insolvency Act does not apply. The remaining arguments by the Estate and Wife’s counter-arguments are not recounted here because of their esoteric nature to non-lawyers.
The take-away message in the Nauert case is consistent with the Karpien and Oldham cases discussed in Parts 1 and 2 of this series – the divorce proceeding must be concluded before the probate case moves forward because you need to know what is left after the divorce that flows through to the deceased spouse’s estate that is available for distribution to the heirs.