If a spouse dies, the spousal and/or child support payments die with them. This leaves the surviving ex-spouse scrambling financially. Life insurance is rarely a hotly contested issue in divorce cases. In fact, it’s often overlooked and left out of the Marital Settlement Agreement.
Life insurance can be a viable option to ensure the financial stability of the ex-spouse and children in the event of the ex-spouse’s death.
If you are the supporting spouse, this may be an uncomfortable idea. However, especially in the case of child support, think in terms of being able to continue to provide for your children even if something happens to you. Chances are good that you would want to have a life insurance policy for them, anyway.
There are several factors that need to be considered when pursuing an order of life insurance to ensure continued support in the event of the death of the supporting spouse.
Amount of the Policy
The amount of the policy should be calculated based on the amount of support that is awarded. Child support generally terminates once the child reaches 18 or graduates from high school. There are some circumstances in which it may continue beyond that. Spousal support varies greatly depending on the length and conditions of the marriage. Spousal support is at the discretion of the presiding judge.
Type of Policy
The type of life insurance policy is an important consideration. There are many life insurance options. An experienced family law attorney will be able to help you select what type of policy should be requested. They will take into consideration your likely support order and your present and likely future financial situation.
Who iIs the Beneficiary?
In the case of spousal support, the supported spouse should be the beneficiary. In the case of child support, will the children be the beneficiaries? If the supporting spouse dies and the policy is paid to the children will it be put into a trust? These are questions that need to be answered.
Funding the Policy
Who will fund the policy needs careful consideration. Will the supporting spouse fund it entirely or will the supported spouse? Will the cost be shared? If the supporting spouse is funding the policy, will support payments be calculated based on their income before or after payment of the premiums?
Oversight of the Policy
If the supporting spouse is the sole owner of the policy, how will the supported spouse know that the policy is still in effect and that the beneficiaries still comply with the court order? There needs to be a mechanism in place for the supported spouse to monitor the policy. Possible options include: requesting a duplicate statement be issued, an automatic notification from the insurance carrier each time a premium payment is made, or a phone number that the insurance company provides that can be used to verify payment.
Cancellation of the Policy
At what point is the obligation to carry the policy terminated? Although it seems obvious that the policy should terminate when the obligation for support ends, it’s best to make sure that this is spelled out in the settlement agreement so there’s no confusion.
Which insurance company will be used? The supported spouse may want to make sure that a solid company with a good reputation is used so they can feel confident that it’s not going to go out of business.
Life insurance to secure support payments can be a delicate matter to discuss. The attorneys at Boyd Law have the compassion and experience needed to navigate this challenging journey in a way that provides for you and your children now and in the future.