Life Insurance as a Means of Securing Child Support Payments

Upon divorce or separation, each parent is still required to financially support their children. The non-custodial spouse will be tasked with making child support payments to the parent with primary custody of the children.

However, if the person paying child support passes away before they fulfill their child support obligations, the recipient parent may wonder what recourse they have to collect money from the estate to use for child support.

One option is to secure child support payments with a life insurance policy.

What to know

Establishing a life insurance policy as a means of securing support obligations should be a topic that comes up during divorce negotiations. There are several options here, including naming the child, the other parent or a custodian as the beneficiary of the policy.

Naming the child as the beneficiary may be the most direct approach, but it may result in a situation in which the child receives a large lump sum of money at the age of 18 and is not entirely mature enough to be able to handle that responsibility.

Naming the other parent as the beneficiary can be beneficial if there is a stipulation that the funds must be used for child support. However, there are some downsides to this as well. The proceeds from this policy would not be protected from your ex’s creditors and could be affected by bankruptcy or other claims. There’s also no guarantee that the spouse will use the proceeds for the benefit of the children.

The best option, then, may be to name a third-party custodian or a trust as the beneficiary. The custodian or trustee can then hold the property for the child’s benefit until slightly later into adulthood, and may not use the benefits for him or herself.

For more information about using life insurance policies to protect child support, contact an experienced divorce lawyer at Bryan L. Salamone & Associates.