How is Life Insurance Divided in a Divorce?
Posted May 5th, 2023.
A life insurance policy can be considered an asset, and that means that it may need to be dealt with during a divorce. If you or your partner have a policy, you need to take the time to learn more about who is entitled to it and how it can be split up. Now may be a good time to contact family lawyer Mark S. Guralnick.
What if I Have a Term Life Insurance Policy?
Term life insurance is not often a factor in divorce proceedings. This type of life insurance policy only lasts for a certain period of time, like 10, 20, or 30 years. If the policyholder passes away in that time, the beneficiary of the policy would receive a payout.
This payout is not guaranteed though. The person who takes out the policy could easily outlive the term they selected. At the same time, a term life insurance policy does not build up cash value like some other types of policies would. So this is unlikely to be seen as an asset and would not need to be split up in a divorce.
What if I Have a Whole Life Insurance Policy?
Whole life insurance is different. It does not have a specific timeframe, so a payout is guaranteed at some point. It can also build up cash value as you pay your premiums each month.
So this is an asset that needs to be divided up. This can be a bit tricky, but one popular way to handle this is to take the cash value of the policy and close it out. Then that cash can be split up like any other asset in the divorce.
This can be beneficial in a few ways. First, you do not have to fight to keep this policy and then lose out on other assets to your spouse. You can also use the cash value of the policy to pay other bills, like lawyer fees or the joint debts you and your ex-spouse have accumulated. This also gives you the chance to reassess your life insurance needs and find a less expensive policy that better suits you.
Will My Spouse Stay as My Beneficiary?
In some cases, a spouse has their beneficiary status revoked when the divorce goes through. You can choose to keep them on as a beneficiary though. This can be a good idea when you have minor children and you trust your ex-spouse to manage the money for them. A payout from a policy can also cover your financial obligations, like spousal support and child support, if you pass away.
Schedule Your Free Consultation
Whether you have a life insurance policy or your spouse does, we are ready to help you figure out what needs to be done with it during the divorce process. Contact the law offices of Mark S. Guralnick and make sure that you are not leaving any assets that you might be entitled to behind in negotiations.