What does life insurance have to do with my divorce settlement?

Life insurance in a divorce settlement is generally used as security for financial obligations of spouses to one another (or to their children). If one spouse dies before all of his or her financial obligations are met, life insurance is the vehicle most often used to compensate the surviving spouse and/or the surviving children.

Some practical tips:

  • Provide for a decreasing death benefit, considering that the financial obligations will likely decrease over time
  • Have an ending date for the life insurance obligation. Consider that the life insurance premiums at some time may skyrocket and be unaffordable, or worse that the life insurance may no longer be available at all
  • Select a death benefit amount that takes into consideration that the life insurance proceeds will be received lump sum, and tax free
  • Identify the specific policies to be maintained by company and policy number
  • Provide for independent verification of compliance by the insured party—if the insured party dies and there is no policy, the surviving party may have little or no recourse
  • Insist that no loans be taken that would reduce the death benefit to be paid to the surviving party
  • If the recipient is financially irresponsible, suggest that a life insurance trust be named as beneficiary

Divorce settlements are complex. Life insurance is only one of many issues which should be addressed as part of an overall settlement. Don’t go it alone. Call one of our seasoned attorneys at Ryan Faenza Carey for assistance.

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