While U.S. Savings Bonds may not be held by everyone, when they are held by people going through a divorce, the unique rules governing U.S. Savings Bonds should not be overlooked. Failure to address the division of these assets in a Matrimonial Settlement Agreement could render an unintended result whereby the former spouse, designated as the beneficiary, redeems the aforesaid bonds upon the bondholder’s death, notwithstanding that the parties have already been divorced.
In the recent case of In re: Estate of Michael D. Jones, 259 N.J. 584 (2025), a husband and wife divorced in New Jersey without specifically addressing the division of the U.S. Savings Bonds in a Matrimonial Settlement Agreement. The bonds were held by the husband and the wife was the designated beneficiary on the bonds. The Matrimonial Settlement Agreement did include a catchall phrase stating, “any marital asset not listed below belongs to the party who currently has the asset in their possession.” After the divorce, the husband did not change the beneficiary designation on the U.S. Savings Bonds and, therefore, his former wife remained the designated beneficiary on the bonds. Upon the husband’s death, the former wife redeemed the bonds in the amount of $77,800.00 and the husband’s estate sought to claw back the funds, due to the divorce.
The issue which went to the New Jersey Supreme Court was whether a divorce automatically revokes the former wife as beneficiary of the U.S. Savings Bond held by the ex-husband. The Court was unpersuaded by the catchall language and determined that the U.S. Savings Bonds were not adequately addressed in the Matrimonial Settlement Agreement. Likewise, the Court determined that N.J.S.A. 3B:3-14, the state statute which revokes beneficiary registration of assets as a matter of law upon divorce, recognizes that certain government instruments, such as U.S. Savings bonds, are exceptions to the aforesaid revocation provisions.
In re: Estate of Michael D. Jones makes clear that unless specifically addressed in the Matrimonial Settlement Agreement or Final Judgment, the Court will not disturb a beneficiary designation on the U.S. Savings bonds that may have been made many years before a divorce. The takeaway for divorcing couples is clear. After the divorce, change the beneficiary designation on any U.S. Savings Bonds you intend to hold or (at a minimum) redeem the bonds, to avoid any confusion as to ownership following the death of the bondholder.
* Victoria Paone Rosa, Esq. is an associate at the Law Offices of Paone, Zaleski & Murphy working out of the firm’s Red Bank office, located at 120 Maple Avenue. Victoria limits her practice to divorce, child support, child custody, equitable distribution, alimony, domestic violence, palimony, and all other family law issues.
