In this probate dispute, the court considered whether application of N.J.S.A. 3B:3-14 conflicts with federal regulations governing ownership of United States Savings Bonds to warrant preemption by virtue of the Supremacy Clause, Article VI, Clause 2, of the United States Constitution. Under N.J.S.A. 3B:3-14, divorce automatically revokes a disposition of property in a governing instrument made by a divorced individual to his or her former spouse before the divorce. Defendant ex-wife filed a claim against her ex-husband's estate seeking payment of outstanding obligations under the parties' divorce settlement agreement (DSA) when her ex-husband died intestate prior to satisfying the obligations. The ex-husband's estate sought to offset payment of the DSA's outstanding obligations with payment defendant received as the pay-on-death (POD) beneficiary when she redeemed federal savings bonds owned by her ex-husband.
Although her ex-husband had not changed or revoked the POD beneficiary designation on the bonds following the divorce as permitted under federal regulations and the DSA was silent as to the disposition of the bonds, the trial court applied the presumptive revocation provision of N.J.S.A. 3B:3-14 to grant the estate partial summary judgment, allowing the redemption of the savings bonds to partially satisfy the DSA obligations. The court reversed, holding that because federal regulations govern the rights and obligations created by a beneficiary's bond ownership, absent evidence of fraud, breach of trust, or other wrongful conversion of property, the regulations take precedence and preempt the inconsistent provisions of N.J.S.A. 3B:3-14. The court held that by determining defendant's beneficiary designation was automatically revoked under N.J.S.A. 3B:3-14 by virtue of the divorce, the trial court misinterpreted the DSA and failed to give effect to defendant's federal ownership rights, "render[ing] the award of title meaningless." Free v. Bland, 369 U.S. 663, 669 (1962).