A woman who dropped divorce proceedings three days after her husband died is entitled to the proceeds from his insurance policy but cannot claim his pension benefits, according to a recent Pennsylvania Superior Court ruling affirming an Orphans' Court holding addressing the effect of a postnuptial agreement between the couple prior to the issuance of a final divorce decree.
Michael Easterday died without a will on Sept. 21, 2014. In addition to his three children, he was survived by his second wife, Colleen A. Easterday. A little over a year before Michael died, in August 2013, Colleen Easterday filed for divorce. That November, Michael signed an affidavit of consent to divorce and returned it to Colleen. Colleen held on to the affidavit until January 14, 2014, when she returned it to her attorney, who filed the affidavit for finalization of the divorce. As luck would have it, Michael died before the final divorce decree was entered. Colleen withdrew the divorce action three days after Michael died. At the time of his death, Colleen was still the named beneficiary of his pension and life insurance policies.
The estate’s administrator filed a petition in Orphans' Court to compel Colleen to turn over the life insurance proceeds and pension benefits. The petition cited the Easterdays’ postnuptial agreement, executed on Dec. 5, 2013, in which they each agreed to waive their respective rights in each other’s pension and retirement plans, including any surviving spouse or beneficiary rights. Under its terms, the postnuptial agreement would remain in effect regardless of reconciliation, change in marital status or the entry of a final divorce decree, unless they both agreed in writing to change or terminate the agreement. No changes were made prior to Michael’s death.
The Orphans' Court concluded that the estate was entitled to the decedent’s pension benefits under the postnuptial agreement, but Colleen was still entitled to the insurance proceeds, which the postnuptial agreement didn’t address. The parties cross-appealed to the Pennsylvania Superior Court.
The estate argued that the Orphans' Court should not have relied on Tosi v. Kizis, which required the court to evaluate the estate’s petition under the “legal fiction” that no divorce proceedings were pending when the decedent died. The Superior Court agreed, finding that a Pennsylvania Supreme Court rule issued the following year superseded Tosi.
In Tosi, the Superior Court concluded that a wife’s power to discontinue her divorce action four months after her husband’s death under Pennsylvania Rule of Civil Procedure 229 was not preempted by 23 Pa. C.S. Section 3323(d.1). Instead, the Tosi court found that Section 3323(d.1) merely provides that if one of the parties in a divorce action dies, the action may continue and any economic claims will be determined under equitable distribution principles rather than under the elective share provisions of the Probate, Estates and Fiduciaries Code.
The Superior Court issued the Tosi decision in 2014. In 2015, the Pennsylvania Supreme Court adopted Rule of Civil Procedure 1920.17, which provides that “[i]n the event one party dies during the course of the divorce proceeding, no decree of divorce has been entered and grounds for divorce have been established, neither the complaint nor economic claims can be withdrawn except by the consent of the surviving spouse and the personal representative of the decedent.” If no agreement is reached, the economic claims will be determined under the Divorce Code.
The estate also argued that the Orphans' Court erred in not applying Section 6111.2 of the Probate Estates and Fiduciaries Code to invalidate the decedent’s designation of Colleen Easterday as his life insurance beneficiary because when Michael died, no divorce decree had been entered, but grounds for divorce had been established. But the Superior Court disagreed, holding that grounds for divorce had actually not been not established under Section 3323(g) of the Divorce Code, which provides that when parties are proceeding under the “no fault” provision of the Divorce Code, as the Easterdays were, grounds are established where both parties file affidavits of consent. Under Pa.R.C.P. 1920.42(b), affidavits of consent must be filed 1) 90 days or more after filing and service of the complaint and 2) within 30 days of the date the consents are executed. Michael’s affidavit was filed more than 30 days after it was executed.
Turning to Colleen Easterday’s appeal, the Superior Court affirmed the Orphans’ Court ruling that she was not entitled to the decedent’s pension benefits under the Postnuptial Agreement.
Colleen argued that, despite the terms of the Postnuptial Agreement, Michael made a deliberate choice to give her his pension benefits after his death, noting that she had his sole caretaker until the day he died. She also argued that the Employee Retirement Income Security Act (ERISA) preempts Pennsylvania state law, specifically Section 6111.2 of the PEF Code, as well as the parties’ PNA.
Noting that Colleen had not disputed her waiver her rights to Michael’s pension in the Postnuptial Agreement, the Superior Court found that because the Postnuptial Agreement is “clear and unambiguous” on its face, any extrinsic evidence about the nature of the parties’ relationship is inadmissible. ERISA also does not bar the estate’s recovery of the pension funds because Colleen’s waiver is binding and the estate is entitled, under principles of state contract law, to enforce the agreement between the parties.
This case is a prime example of the intersection of divorce law and estate law. The timing of Michael’s death during the pendency of the divorce proceedings was quite unfortunate for a number of reasons. If Michael’s death was not sudden, perhaps Michael and Colleen might have been able to take certain steps to avoid litigation upon his death, but we don’t know. What did Michael ultimately want in this situation? Did he intend for Colleen to receive his insurance proceeds regardless, or did the postnuptial agreement inadvertently fail to address them? Did he intend for Colleen to receive his pension benefits since she was named as his primary beneficiary upon his death? The irony of the situation is that Michael’s estate and Colleen likely expended considerable funds and time litigating over a postnuptial agreement which was intended to avoid litigation, not cause it.