Term Life Insurance Articles
How Term Life Insurance May Be Used In Divorce Settlments
2011-08-25
There have been some recent divorce rulings that have defined a term life insurance policy as community property. When this happens, divorce life insurance needs to decide who continues to pay the premiums, who becomes the beneficiary and so forth.
If the policy was purchased when the couple was married and both people equally contributed to the premiums, it is community property. It is then no longer a matter of whether one person is the named and one is the beneficiary.
Otherwise, you have a few choices.
You can choose to cancel the policy and forfeit all moneys that have been paid into the policy. Neither party usually likes to do this because the cost of getting another policy will now be more expensive.
There is also the option of changing the beneficiary to the children. As a general rule, if everything was left status quo, and one parent died, the surviving parent would be able to use the money to help support the kids and also do what they like with the money. If it is transferred to the children, however, it can go into a trust fund that has specific rules attached to it for what the money can be used for.
The final choice is that the policy is changed to name a different person as the holder of the policy. This usually takes the cooperation of both partners and potentially a court order.
It is always important to understand what your options are in a divorce life insurance policy, even if you do not ever plan on getting divorced. When there is a divorce that ends amicably it is usually much easier to discuss these options, however they can get a little messy, especially if one of the spouses choose to get re-married.
When no children are involved, it is possible to name an estate lawyer as the beneficiary. It is also easier, too, when both spouses have a term life insurance policy on themselves as opposed to just one spouse having a policy. This way, it is easier to divide the "community property" as there are two policies and each party gets the one that belongs to them. They can then choose to name whoever they want as the beneficiary without causing any financial harm to the other party.
If you are concerned with the possibility of divorce when you are starting to shop for a term life insurance policy, make sure that you speak your concerns to your insurance agent as they can help you with some of the different options. You can also talk to a lawyer in your state to know what the different state rules are.
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There have been some recent divorce rulings that have defined a term life insurance policy as community property. When this happens, divorce life insurance needs to decide who continues to pay the premiums, who becomes the beneficiary and so forth.
If the policy was purchased when the couple was married and both people equally contributed to the premiums, it is community property. It is then no longer a matter of whether one person is the named and one is the beneficiary.
Otherwise, you have a few choices.
You can choose to cancel the policy and forfeit all moneys that have been paid into the policy. Neither party usually likes to do this because the cost of getting another policy will now be more expensive.
There is also the option of changing the beneficiary to the children. As a general rule, if everything was left status quo, and one parent died, the surviving parent would be able to use the money to help support the kids and also do what they like with the money. If it is transferred to the children, however, it can go into a trust fund that has specific rules attached to it for what the money can be used for.
The final choice is that the policy is changed to name a different person as the holder of the policy. This usually takes the cooperation of both partners and potentially a court order.
It is always important to understand what your options are in a divorce life insurance policy, even if you do not ever plan on getting divorced. When there is a divorce that ends amicably it is usually much easier to discuss these options, however they can get a little messy, especially if one of the spouses choose to get re-married.
When no children are involved, it is possible to name an estate lawyer as the beneficiary. It is also easier, too, when both spouses have a term life insurance policy on themselves as opposed to just one spouse having a policy. This way, it is easier to divide the "community property" as there are two policies and each party gets the one that belongs to them. They can then choose to name whoever they want as the beneficiary without causing any financial harm to the other party.
If you are concerned with the possibility of divorce when you are starting to shop for a term life insurance policy, make sure that you speak your concerns to your insurance agent as they can help you with some of the different options. You can also talk to a lawyer in your state to know what the different state rules are.
