When you are going through a divorce, you will likely need to divide up marital property. While it may not be the first thing you think about, this includes your life insurance policy. You will want to ensure that the financial interests of your children are taken care of. Your life insurance policy could be considered marital property and therefore be included in a divorce agreement regarding the distribution of assets. This is an important issue that you will want to review with an attorney who can help sort things out. Our Hudson County Property Distribution Attorneys can protect the best interests of you and your children at this time.
What should I expect when allocating finances in a divorce?
All divorces differ. Usually, insurance will come up during a settlement negotiation. With the help of an attorney, you will need to determine what is best for your children. The financial status of your spouse will also be considered when determining the fate of your life insurance policy. The best interest of the children will always be a top priority of a court.
What are the different types of life insurance?
Term and permanent are two types of life insurance policies.
Term: This policy provides coverage for your death for a specific period of time, or term. It covers a temporary financial need that expires between 10 to 30 years. Your beneficiaries receive a payout if you die within that timespan. This policy is not treated as a marital asset during a divorce proceeding, because it holds no cash value.
Permanent: These policies do hold cash value, are considered an asset, and will likely be split in a divorce agreement. Negotiation of the cash value would have to take place since the actual policy cannot be split.
How is life insurance divided in a divorce?
As you can see, there is no one right answer. Many factors come into play when dividing assets, including life insurance policies.
Maintaining the integrity of your life insurance can be the best way to go if you have kids. Here are some reasons why you might want to keep your spouse as the beneficiary after divorce:
- You are amicable and trust your spouse
- You assume your spouse will be financially responsible for your children
- The policy could cover your financial responsibilities to your spouse, such as child support or spousal support
- Your spouse requires the money to cover their obligations to the kids
- You are in a risky line of work
The decision of whether or not to keep your spouse on your policy will be part of the divorce agreement. It’s important to plan for the long term when getting divorced. These decisions can be supported with the help of an experienced attorney.
