On January 28, 2009, the Appellate Division issued a reported (precedential) opinion in Kay v. Kay that held that when the estate of a spouse who died while an action for divorce is pending presents a claim for equitable relief related to marital property, the court may not refuse to consider the equities arising from the facts of that case solely on the ground that the estate may not assert equitable claims against the marital estate sounding in constructive trust, resulting trust, quasicontract or unjust enrichment.  This case rejects the holding in Krudzlo v. Krudzlo, a reported trial court opinion from 1990.  To read the full opinion, click here.

The basic rule is that a divorce case abates and no equitable distribution can be had when a spouse dies during the pendency of divorce.  However, there is a Supreme Court case called Carr v. Carr that created equitable remedies for a surviving spouse that would otherwise get nothing where the assets were all held by the other spouse and the rights to equitable distribution and an elective share are unavailable under the law.  This case provided a remedy for what was called the "black hole."

The Krudzlo case held that the estate of a dying spouse could not assert claims for equitable relief against a surviving spouse.

In Kay, there husband died.  At the the time of his death, he had limited assets in his name, insufficient even to pay his legal fees and burial expenses.  On the other hand, it was asserted that the wife had more than $650,000 in assets.  It was also asserted that the wife dissipated marital assets, diverting them to her own name and her daughter.

Given that the court’s seek fairness and equity, the Appellate Division held that it was inappropriate to have a blanket rule preventing the estate from making equitable claims.  The Court did not decide the underlying merits of the claim, however. The estate will have the ability to make a claim to prevent the unjust enrichment of the surviving spouse.