Life Insurance in Divorce

The dissolution of a marriage, or a divorce, is often an emotionally turbulent time for both couples and families. If you are going through a divorce, it’s important to understand all of you and your ex-partner’s obligations under the law. Most divorces require a myriad of considerations for both parties, including questions about property division, alimony, child custody arrangements, child support, and more. Life insurance is another important consideration that is often overlooked in divorce proceedings, in large part because it is intended to protect a future interest and is not necessarily immediately relevant. However, this does not diminish its importance. In many divorces, one or both spouses are required to maintain an active life insurance policy in the event of their death before completing child and/or spousal support obligations. To learn more about life insurance and divorce in New Jersey, keep reading. If you are going through a New Jersey divorce, contact an experienced divorce attorney to help you protect your interests and ensure the best possible outcome for both you and any minor children.

Life insurance provides vital protection for everyone, including and sometimes especially those going through a divorce. In this case, life insurance is used to secure the complete payment of alimony settlements. Without life insurance, or in the event of an inadequate policy, alimony recipients would be forced to sue the estates of their deceased ex-spouses to collect any remaining financial obligations. This can be an exhausting, trying, years long process. If you are in the midst of a divorce, save yourself the heartache of possible litigation and make sure your future is secure with an active and adequate life insurance policy that names you as the designated beneficiary.

Indeed, life insurance policies are not only a prudent idea but are often a legally mandated obligation for the ex-spouse who is responsible for paying an alimony settlement. There are some exceptions to this rule, including lump sum alimony payments and those who are unable to obtain life insurance due to some medical or other disqualification. In the case of a lump sum alimony payment, there is no future stream of income for the recipient spouse that must be secured with a life insurance policy. If the paying spouse does not qualify for an adequate life insurance policy, your divorce attorney should include language in your settlement that provides for an alternative security measure for you and your future. For example, a lien may be placed on the decedent’s estate in your name to secure payment even in the event of the paying ex-spouse’s untimely demise.

In the event of a divorce, how big of a life insurance policy must the paying party maintain? According to the rules governing life insurance and divorce New Jersey, the ex-spouse responsible for making alimony payments must keep a life insurance policy large enough to cover the entire amount to be paid over the time specified in a settlement. For example, if one spouse is ordered to pay the other $1000 a month for five years, that’s a total of $60,000 in alimony. If the paying spouse were to die after only two years, the recipient would still be due over $30,000 in future spousal support payments. In that case, the party responsible for making spousal support payments must keep a policy worth at least $60,000 with his or her ex’s name as the beneficiary. This ensures payment of the entire alimony settlement amount, even in the event of the unthinkable.

What about life insurance that is purchased during the marriage and not in consideration a divorce and securing the fulfillment of support obligations? If you purchased a life insurance policy during the course of your marriage and named your spouse as the beneficiary, what happens to that policy once the marriage has been dissolved? In the event of your death, will your ex-spouse still benefit from the life insurance policy you purchased while married? The answer varies case to case and state to state. In the event of life insurance and divorce in New Jersey, courts have relied on a revocation upon divorce statute to determine the outcome. Essentially, this means that any contractual obligation where one spouse names another as a beneficiary to something is automatically revoked in the event of a divorce. In 2009, this was interpreted to mean that even though a life insurance policy still listed an ex-spouse as the beneficiary of it, they were not entitled to the proceeds as the designation of beneficiary was revoked at the time of divorce. Courts in other jurisdictions have found this application of the statute to be unfair, and have ruled that the contractual intent of the decedent when they named the beneficiary, regardless of their status as married or divorced, must be honored.

If you and your spouse have come to the difficult decision to end your marriage, the coming months will be stressful and challenging, with many legal uncertainties to navigate, including possible provisions for the future through life insurance. If you need help navigating the legal complexities of the dissolution of a marriage, including the implications of life insurance and divorce in New Jersey, you should not wait to contact an experienced and dedicated divorce attorney to discuss your case and your possible options. You do not have to go through this challenging time alone, and you shouldn’t. To achieve the best possible outcome in your divorce proceeding, call the Law Offices of Peter Van Aulen at 201-845-7400 for a consultation.