During divorce negotiations, there are all kinds of financial issues to be addressed – one of which to consider is the issue of life insurance.
What’s life insurance got to do with your divorce? If your future ex-spouse is ordered to pay child support or provide you with spousal maintenance (alimony), life insurance can be used to guarantee their obligation.
How life insurance and support obligations intersect
Child support represents a parent’s obligation to provide for their children. Spousal maintenance is often awarded to a dependent spouse based on factors such as the length of the marriage, the dependent spouse’s earning capacity and ability to become self-sufficient. Both child support and spousal maintenance might vanish if an unfortunate accident or illness prematurely claims the life of the paying spouse.
Life insurance can be used to make sure that you and your children are provided some measure of financial protection. During your divorce negotiations, you may want to address:
- The amount of the policy(ies) that your ex-spouse will have to maintain.
- Who will pay for the policy or policies.
- When the obligation to maintain coverage will end.
- Notice requirements in the event coverage lapses for any reason.
You will also want to negotiate how the beneficiary designations will work. For example, a policy designed to cover your ex’s spousal support obligation should list you as a direct beneficiary. But to cover their child support obligation, your ex may instead want to designate life insurance proceeds be paid into a trust for benefit of the children with a third party chosen as a trustee.
Be mindful, in Missouri for example, beneficiary designations listing an ex spouse are only valid if they are reaffirmed or a new policy beneficiary designation listing an ex takes place after the date of a judgment of dissolution of marriage. To wit; 461.051 RSMo “If, after an owner makes a beneficiary designation, the owner’s marriage is dissolved or annulled, any provision of the beneficiary designation in favor of the owner’s former spouse or a relative of the owner’s former spouse is revoked on the date the marriage is dissolved or annulled, whether or not the beneficiary designation refers to marital status.”
To better ensure your financial well-being and the financial stability of your children, it’s necessary explore all possibilities – even ones that you might hate to consider. Seeking experienced legal guidance can help you to effectively advocate for what you need (and deserve) in your divorce and grants better overall security.