Life Insurance After Divorce is something that needs to be talked about. Facing a Divorce involves you accepting tons of changes. And I do not just mean emotional, there are tons of financial decisions that you would be required to make or even be subjected to depending on the nature of the split and any court orders that would be taking effect.
Life insurance and divorce are not always what comes first, and you would think of them when you commence the process. But whether you and your ex-spouse have any pre-existing policies or your finances are connected via alimony or even child support, there are tons of ways life insurance and divorce settlements can turn out. Well, below we would be going over some things we know.
Life Insurance and Divorce Settlements
If you put up life insurance for consideration when it comes to a divorce settlement, it is very important that you ask this question “Are Life insurance proceeds marital property?” this question is very important seeing as both spouses are expected to list their assets as a part of the settlement process. Well, the answer depends mainly on the kind of policy you have. In most situations, the term life insurance is not considered an asset.
However, life insurance that is permanent is usually counted as an asset mainly because the policy is accommodated with cash value. Depending on the state you’re in, you might encounter some nuances involved. There might be wiggle room in some states, depending on if you purchased the permanent life insurance policy was purchased before you got married.
What is Life Insurance
Term life insurance is not considered a financial asset during a divorce, but that does not exactly means that ere are not so many changes that need to be made. Just check to see who you have listed as your beneficiary.
A lot of people select their spouse as the beneficiary of the policy. But when you get divorced, you might want to make a switch. Your life insurance company needs to be contacted, and you would need to fill out the required paperwork to have your beneficiaries updated.
Usually, Most Life insurance companies often prohibit naming your minor children as beneficiaries; they would be required to at least be 18 years old. Instead, you can choose to create a trust for your children and name the trust as the policy beneficiary. Then, if you pass away during the term, your selected trustee would manage the funds till the kids get to an appropriate age in other for them to inherit the funds.
Permanent Life insurance with Cash Value
A permanent Life insurance Policy works quite differently from a divorce mainly because it comes carrying cash value. As a part of the ongoing premium payments, head right into a savings or investment account, which is considered to be a marital asset. Consequently, that cash value amount is to be listed as an asset. Thus, it would be subjected to negotiations during the divorce settlement.
If the situation dictates that all the marital assets get split in half, then the policy may need to be terminated in other to access the cash value. Then you would each need to reevaluate your life insurance needs based on your new financial responsibilities.
Can you Get Life Insurance on an ex-spouse?
If you are receiving alimony and/or child support from your ex-spouse, it is quite logical for you to think about the need for a life insurance policy on that individual. After all, if they pass away without a policy that has been put in place, they would no longer get financial support. However, you cannot just get a life insurance policy in the name of that person.
Instead, you are expected to make a new policy part of the divorce settlement process. Work alongside your ex-spouse and your lawyer in other for you to get a quote on an appropriate death benefit and term length that is based on your new needs.