In the US, married couples who purchase life insurance as part of their financial plan need to consider several life insurance issues if they decide to divorce.
We consulted with busy Somerset County, NJ family law and child custody attorney Katherine K. Wagner, Esq., and between Ms. Wagner and myself, a legal assistant for a life insurance attorney in NJ, we have found that clients contemplating divorce needed to be counseled regarding the following:
You Can Use Life Insurance to Protect Your Children
As part of the divorce, the family law judge may order either parent to maintain life insurance, especially the parent obligated to pay child support, alimony, or both. This protects the family’s income stream in case something happens to the obligor parent.
The parent who has custody of the children of the marriage may also want to take out life insurance to protect his or her children. The kind of insurance you take out and how much you take out will depend upon the number of children you have, how old they are, and your income. You can either find a free life insurance calculator online or contact your life insurance carrier for more information and guidance.
You Should Change the Beneficiary of Your Life Insurance Policy
Most married couples name one another as the beneficiary on their life insurance policies. After you are divorced, you should change beneficiaries if you are prevented from doing so by court order. You might not want your ex to receive money if you die!
Find Out If Your Life Insurance Policy Is Considered a Marital Assets
This depends upon whether your life insurance policy is a “Term Life” policy or a “Whole Life” policy.
Term Life Policies
Term Life policies have no cash value and are not considered marital assets – but a Term Life policy may figure otherwise in your divorce. Either the Court can order you to maintain life insurance if you are obligated to pay child support, alimony, or both, or, if you have custody of the children you may want to maintain life insurance to benefit them.
Whole Life policies
Whole Life policies do have cash value and are considered marital assets, and they will be divided as part of the divorce proceedings. It is usual for a divorcing couple to just cahs out their Whole Life policies and then divide the proceeds equally.
You will have to address these life insurance concerns when you divorce. If I were you, I would change nothing until I consulted with my life insurance attorney, just to make sure what I wanted to do with the life insurance was legal and also right for my family.
Author’s Bio – Veronica Baxter is a roller-derbying, harley-toting legal assistant working out of the greater Philadelphian metropolitan area.