The Children Are Our Future, Just Not When It Comes to Their Parents’ Divorce Decree
Children of divorcing parents do not sign their parents’ separation agreements. But if issues of child support and custody are in play, those same agreements will contain paragraph after paragraph about those very children. Which begs the question: Are children of divorcing parents recognized as third-party beneficiaries of their parents’ separation agreements, divorce decrees, etc.? According to a recent decision of the Surrogate’s Court in Oneida County, New York, it would be unwise to assume that the answer is a definitive “yes.”
In Matter of Panella, 2022 NY Slip Op 22293 (Surrogate’s Court, Oneida County, Sept. 21, 2022), two children (Nicole and Stephen), whose father, Richard, had died, petitioned to enforce a provision in their parents’ separation agreement, incorporated into a divorce decree, which “obligated their father to bequeath 100% of the value of his estate to them.” Richard bequeathed his entire estate to his second wife, Deborah, who was not the children’s mother. The children called their natural mother, Carol (i.e., Richard’s ex-wife) as their “main witness.”
In 1985, each parent executed a Will, bequeathing their respective estates to the other, and upon the death of the surviving spouse, to the children in equal shares. The parties’ 1989 separation agreement contained the following clause regarding the “Last Will and Testament of [the] Parties”: “The parties agree to execute his or her Last Will and Testament, naming the two children as irrevocable beneficiary, the two children to receive a total of 100 % of the existing assets of his or her gross estate. Each party shall provide the other with a conformed copy of the executed Will.”
Each parent remarried post-divorce, and each parent also executed new Wills. Carol’s testimony acknowledged that she never provided a copy of her new Will to Richard. Carol executed two Wills, post-divorce, the later of which bequeathed her entire estate to her new husband, and upon the death of the surviving spouse, to her children and the children of her new husband (thus, also failing to comply with the separation agreement the children hoped to enforce), in addition to trusts for other family members and bequests for educational institutions and community organizations.
The children argued that Richard breached their parents’ separation agreement when he executed his new Will that not only failed to comply with the separation agreement but fully disinherited them.
Whether the court would rule in the children’s favor rested on their ability to prove legal status as third-party beneficiaries. The court elaborated on three different, prior decisions, all of which stand for the proposition that to attain third-party beneficiary status, the alleged promise must have been “exacted” by the promisee (here, Carol, the mother) “for the benefit” of the “third person.” For example, in one such decision, Ferro v. Bologna, 31 N.Y.2d 30 (1972), “the Court of Appeals found that the children of separated parents could enforce a term within the separation agreement requiring their father to name them as beneficiaries of a life insurance policy. The court noted that in securing this promise, the children’s mother did not ask for child support, waived her right to share in the father’s estate, and made other concessions relative to the distribution of marital property.”
In contrast, Carol, “by her own admission neither initiated nor negotiated that portion of the Agreement providing for irrevocable wills. Equally important, Carol has never abided by this particular provision … she executed two subsequent wills that did not name her children the sole beneficiaries of her estate.” Adding to the court’s reasoning in denying relief to the children, the court noted that “Carol—and not decedent—was the first to change her will after the divorce, because it suggests that Carol (promisee) did not intend to confer upon the children the benefit they now seek to enforce against decedent’s estate. Without such an intent on the part of the promisee, the children cannot prevail as third-party beneficiaries.”
The presumably disappointed children asked the court to rule in their favor “in the interests of justice.” If we consider the interests of Richard’s surviving (second) spouse, Deborah, it begs the question of whether the court in fact acted justly in upholding Richard’s new Will benefitting Deborah. Although the court did not address this issue, if it awarded Richard’s entire estate to the children, it would have potentially vitiated all the rights New York law would otherwise confer on Deborah as Richard’s surviving spouse—and without her knowledge or consent. The decision does not address whether Deborah could have filed a claim for an elective share even if the court ruled that Richard’s new will should have bequeathed his entire estate to his children.
Academically speaking, Panella provides a multitude of questions fit for a law school exam, such as, can a separation agreement with one spouse effectively eliminate a future spouse’s estate rights? Diving deeper, do separation agreements, such as the one in Panella, that seemingly prohibit all testamentary provisions in favor of a new spouse, pose a barrier to remarriage in violation of Section 253 of the Domestic Relations Law? And if not, what if the separation agreement went further and even required that a party cannot remarry unless their new beloved signs a prenuptial agreement waiving all estate rights? You be the judge.
The moral of the story seems to be that including a clause such as that at issue in Panella into a separation agreement is far from sufficient to ensure third-party beneficiary status for the children of divorcing parents. On its face, the clause at issue is straightforward. To the outside observer, it seems enforceable, and unambiguous. But if divorcing parents want to ensure that their children do, indeed, have third-party beneficiary status, then the broad strokes words on the page may not suffice.
"The Children Are Our Future, Just Not When It Comes to Their Parents’ Divorce Decree," by Alan Feigenbaum and Sean Weissbart was published in the New York Law Journal on November 21, 2022.
Reprinted with permission from the November 21, 2022, edition of the New York Law Journal © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited.