When planning for a divorce, as you probably already know, finances play a large role in the divorce process. In many cases, the financial aspects of a divorce are usually the most overwhelming on all parties involved. There are many financial topics to take into consideration including, but not limited to, asset distribution, alimony, child support, retirement accounts, pensions, checking accounts, savings accounts, stocks, bonds, offshore investments, and more.
One financial consideration that most people overlook is life insurance. Commonly, individuals are so focused on the emotional toll of divorce and other financial aspects of the marital estate that they do not consider life insurance policies.
What to Consider About Life Insurance During a Divorce
The divorce attorneys of Wilder Mahood McKinley & Oglesby invite you to consider these topics when your marriage is ending and you are working through the financial aspects of your divorce:
- Life Insurance Beneficiaries – Most life insurance policy holders who are married have their spouse listed as their primary beneficiary with their children as their secondary beneficiaries. If that couple decides to get a divorce, the spouse(s) with the life insurance policy may want to change who their primary beneficiary is with their life insurance carrier. The other spouse will want to have the beneficiary designations maintained during the divorce process.
- Death Benefit Amounts – A divorce changes many aspects of life, and because of this, you may want to reevaluate the death benefit amount of your policy. There are many factors that one should take into consideration when determining their life insurance coverage. Some of these factors include dependents, expenses including alimony and/or child support, and end-of-life costs.
- Court-Ordered Life Insurance – In some cases, a court may order one party to buy a life insurance policy as part of their divorce settlement which can bring financial security to their children and soon-to-be former spouse. Being aware of this ahead of time and talking through this possibility with your divorce attorney can help you prepare.
- Cash Value of Your Policy – Think through how to handle the cash value of your policy. If both parties involved in a divorce jointly own a permanent life insurance policy that has a cash value, that policy will be a topic of discussion during the divorce. Both parties will have to agree on the best way to handle this policy whether it is to split the cash value between each spouse or transfer ownership to one spouse and allow the other spouse to withdraw some of that cash value. The cash value will also have to be considered in the full context of the division of the marital estate.
- Life Insurance Policy Premiums – Consider who will be responsible for the life insurance policy payments. Talk with your lawyer about having payment responsibility written into the divorce agreement. It is critical that both parties identify who will be paying for the premiums as failing to pay the insurance company could cost you the policy.
Related: Learn more about divorce including what to know about health insurance obligations during divorce.
Due to the complex nature of divorce and finances, including all of the unique situations each divorce presents, we recommend that you lean on an experienced divorce attorney to help you through your divorce process. Our experienced attorneys will be able to navigate all these topics, including life insurance, to help you achieve the outcome most important to you.
To learn more about what our experienced attorneys at Wilder Mahood McKinley & Oglesby can do to help you, contact us online or call us at 412-261-4040.