When the children turn either 18 or 21, depending on the laws of your state, the remaining funds would be turned over to them. Most of the time, courts will name an ex-spouse, and he or she will be permitted to spend the insurance funds to benefit the children. Instead, the court that handles your estate would designate a trustee or a custodian to oversee the funds until the children become adults. If you want to name your children as beneficiaries and you die before they turn 18, your insurance company will not release the insurance proceeds to them.
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You may also be directed as to who you must name as a beneficiary and this can include keeping an ex-spouse in that capacity.įor these reasons, in a divorce, it is important to understand and review your life insurance policies and update them as needed, otherwise you could be providing a financial benefit to someone you did not want to have it.ĭepending on who you choose as a beneficiary, there are several things you should know. In some instances, you will be required to carry a life insurance policy as part of a settlement agreement. Generally speaking, in a divorce very few spouses will want to keep their ex as the primary beneficiary, thus necessitating the change. On the surface, this sounds simple, but who you designate as a beneficiary can be a bit more complicated in a divorce. To change the beneficiary of your life insurance policy, you will need to contact your life insurance company and request a Change of Beneficiary form like the one below which you will complete and return to the insurance company. How Do I Change the Beneficiary of my Life Insurance Policy? In all situations, it should be an integral part of any divorce settlement and should be considerable thought before final divorce papers are agreed upon. More often than not, it makes good sense to consult a Certified Divorce Financial Analyst to determine the best options for your financial situation. It might be to ensure premiums continue to be paid, for example. Ownership of policies may be transferred from one spouse to the other for various reasons.For example, a whole life policy may be replaced with a term policy because coverage only needs to be in place for a specified amount of time, usually until children turn either 18 or 21. A new policy may be issued to replace an existing policy because it more aligns with the needs of both sides going forward.
It can be considered part of alimony or child support. A policy may be required to remain in force as part of a settlement if so ordered by the courts.Policies can be cashed out and the cash value, if it is considered a marital asset, can be divided among both spouses.Policies can voluntarily remain in effect to provide financial insurance for children or a spouse.There are several possible options regarding life insurance in a divorce: Working through life insurance as part of a divorce does require some effort, as decisions need to be made about cash value if it exists, who the beneficiaries are going forward, and who will pay for the policy, among other things.
However, life insurance is an important part of the discussion, especially when children are involved, because it can provide years of financial protection for those children and for one or both spouses. Sometimes, life insurance as an issue can be overtaken in a divorce by other higher profile and more contentious issues such as child custody, alimony and asset division.
What happens to Your Life Insurance After Divorce?