How to Deal with Life Insurance During Divorce
Life insurance is one of the financial assets you must disclose during your divorce as part of the equitable distribution process. But the court can treat your policy any number of ways, depending on your family’s overall circumstances:
- A piece of property — A whole life policy has cash value. The court may assess the surrender value of the policy and, if premiums were paid with marital property, treat it as an asset of the marital estate. If the policyholder took out the policy before the marriage and continued to pay premiums with separate property, the policy is separate property.
- Security against support obligations — A court may use the policy as a means of indemnifying a dependent spouse/custodial parent for unpaid obligations.
- Insurance against the untimely death of a supporting spouse/parent — If the court orders the policyholder to pay child support and/or alimony, the court can also order the life insurance policy maintained in case death prevents the policyholder from providing support.
There are many strategies a party to divorce can employ regarding a life insurance policy, including a restraining order preventing the policy owner from changing the beneficiary. This must be more specific than an order preventing a party from transferring property, because a change in beneficiary is not technically a change in ownership. This order can stay in place until the divorce is finalized and then be incorporated into the divorce decree.
However, if the court distributes the policy as property to the policyholder and does not specifically rule on beneficiary rights, the other spouse generally does not have a right to remain as beneficiary.
Bryan L. Salamone & Associates, P.C. provides aggressive representation during and after divorce to protect our clients’ property rights.