Life insurance, more than most things you buy, relates to the circumstances of your life. You buy life insurance to protect your family from financial loss stemming from your death. You tie the amount of your life insurance to the money your family will need to provide an income, pay off debts, put children through college and cover financial commitments.
But what happens to life insurance when you're about to dissolve your marriage? How do you deal fairly with a soon-to-be ex-spouse, yet still make sure you have coverage for the future? Is there a way to provide for adult children of a previous marriage without going broke -- especially if you have children through a second or third marriage?
Here are a number of considerations you should be aware of:
- Don't assume that your insurance agent or company knows about your circumstances. If you don't change your beneficiary, your former spouse may receive the proceeds of your policy upon your death. If the designation simply reads, "husband of the insured" or "wife of the insured," and there is no new spouse, the secondary beneficiary receives the proceeds.
- You may be able to transfer ownership rights of the policy as part of a property settlement or to ensure continuation of alimony payments. Your ex-spouse may not press as hard for more support or a greater slice of an ongoing pension if he or she remains the designated beneficiary on a permanent life insurance policy. Of course, you need to ensure that your policy remains a valuable asset by keeping up premium payments.
However, transferring an existing cash value policy (as opposed to a term policy, may carry with it the burden of federal gift tax, unless you transfer the policy prior to divorce. Be sure to discuss this option prior to the finalization of your divorce.
- Don't overlook the possibilities life insurance may provide for dealing fairly with children from your previous marriage. If you're paying alimony to your previous spouse and have a second family with your new spouse, adult children from your first marriage may sue your estate after you're gone if they aren't dealt with at least as fairly as the children from your subsequent marriage(s).
A permanent life insurance policy can be an immediate "estate replacer" to children from your first marriage -- it helps you replicate accumulated assets that you wish to pass on to the children of your first family -- but can't afford to without neglecting the needs of your new family. Essentially, you purchase a permanent life insurance policy on yourself and designate your adult children as beneficiaries. When you die, proceeds bypass the probate process and pass directly to your adult children. Your immediate spouse and any children from that marriage are left with your accumulated property and assets -- so you've provided for both families.
If you're contemplating divorce, don't forget the options you may have with respect to your life insurance coverage. Divorce is tough enough -- don't overlook the flexibility and security this valuable asset can provide.
Matt McWilliams is one of the co-founders of HometownQuotes.Com, an online insurance quotes web site. He is originally from Pinebluff, NC and graduated from Middle Tennessee State University in 2002. He is considered an expert in the field of online insurance shopping and finding new ways to help consumers save money on their insurance. For more information visit http://www.hometownquotes.com
Selecting a divorce lawyer to handle your family law case... Read More
Mary and Bill recently divorced. Their divorce decree stated that... Read More
Attempts to use the worldwide Web as an effective means... Read More
Marriage is a very solemn and serious chapter on any... Read More
Being marriage means being fully committed to your husband as... Read More
Successfully releasing your anger will help you begin healing after... Read More
We have all most probably encountered it at some stage... Read More
The EmotionsDivorce is a scary, lonely and misunderstood process for... Read More
The biggest mistake that people make when getting divorced is... Read More
A married woman becomes a single woman for one of... Read More
The legal divorce vs. your real divorce The legal... Read More
Everyone has heard the story (from friends, co-workers, and family... Read More
When we were children we believed in fairy tales and... Read More
A divorce case is contested if the parties cannot agree... Read More
You want three things in your divorce attorney: expertise in... Read More
After divorce, the most important thing you can do is... Read More
I thought I would never feel the light of life... Read More
Having to deal with an extramarital affair can be a... Read More
As a licensed mental health professional, I work with many... Read More
This article provides a brief overview on Texas law concerning... Read More
An uncontested divorce is the most common type of divorce.... Read More
What 3 major divorce parenting mistakes that surely lead to... Read More
When a couple decides their marriage is over, a tremendous... Read More
Divorce is something no one hopes will happen to them... Read More
1. DO allow yourself enough time to make one of... Read More
Non-lawyers are often surprised to learn that a spouse can... Read More
Of course you want to get your Judgment--that's the goal... Read More
What 7 most distressful situations to kids that divorced parents... Read More
Stay MarriedAlong with any tough decision comes reluctance, especially when... Read More
There are many steps to take to protect yourself in... Read More
Knowing What To Do In DivorceKnowing what to do when... Read More
1. Have an Clear Written Fee AgreementMost experienced and effective... Read More
The best predictor of a good divorce outcome is the... Read More
There are many steps to take to protect yourself in... Read More
In a recent article entitled "Some Evidence On How We... Read More
Finance in marriage seperation is a very big issue particularly... Read More
The best predictor of a good divorce outcome is the... Read More
If you are reading this, then you are probably either... Read More
What 3 major divorce parenting mistakes that surely lead to... Read More
Husbands cheat on their wives for many reasons. They could... Read More
Going through a divorce is a very challenging time in... Read More
Ignorance is the most common trap in the business of... Read More
According to the Center for Disease Control's National Vital Statistics... Read More
My oldest boy asked me something the other day about... Read More
A divorce case is contested if the parties cannot agree... Read More
Life after divorce is something that most people who are... Read More
If you are in a sexless marriage and are unhappy... Read More
Everyone has heard the story (from friends, co-workers, and family... Read More
Women who believe a divorce is a possibility or who... Read More
If there were no legal system, no lawyers and no... Read More
It's a well known fact that in this day and... Read More
I thought I would never feel the light of life... Read More
The EmotionsDivorce is a scary, lonely and misunderstood process for... Read More
You're going to want to be working on your divorce... Read More
Mary and Bill recently divorced. Their divorce decree stated that... Read More
An uncontested divorce is the most common type of divorce.... Read More
Collaborative law is based on the realization that the commitment... Read More
When a couple decides their marriage is over, a tremendous... Read More
Here are some useful tips on joint bank accounts and... Read More
During a wedding ceremony, when people are joined together in... Read More
There is no magic solution to getting issues surrounding child... Read More
As a licensed mental health professional, I work with many... Read More
When a nuclear family separates, it usually separates into a... Read More
What is the Get?The Get is the Jewish form of... Read More
This article and my articles "Overcoming Obstacles to Agreement" and... Read More
The legal divorce vs. your real divorce The legal... Read More
Divorce |