What To Know About Modifying Your Life Insurance After Divorce
Marital assets and child custody as well as alimony related issues are usually top of mind for most couples going through a divorce. However, life insurance can be just as important and ignoring existing policies during this time could cause some regret going forward. Here’s what you should know about modifying life insurance plans held by you or your spouse after divorce.
Changing the beneficiaries of the policy
Typically, most couples will name their spouse as the beneficiary for the life insurance policy, with all payouts going to their partner in the event of their death. After a divorce, you will generally not want to give your ex-spouse to be a beneficiary. In such a case, consider changing who the beneficiary is. Your will may also need to be modified accordingly.
Protecting your kids’ interests
If you have children, you may still wish to have the life insurance benefit go to your spouse, with the express purpose of the money being used for your children. Something to this effect will need to be mentioned to ensure that if your spouse remarries, the funds don’t go to their new partner instead of your kids.
Using insurance to protect child support or alimony
For someone who is dependent on their spouse for their income, having an insurance policy to back them up is a good idea. If you do not have a job and rely entirely on support received from your spouse, or count on the money they will give you to supplement your own income to run your home and look after your child after divorce, then a life insurance policy becomes your contingency plan. If you do not already have such a policy, be sure to negotiate for one during the divorce settlement. If you already have one, check to see it will cover for the new scenario where you need to run a home independent of your spouse. Even if it means you end up paying the premiums yourself, it may be well worth it. If you are not making the payments, be sure to check that the payments are being done on time so the policy does not lapse at any time even after the divorce is finalized.
Get policy ownership changed to your name
If you are dependent spouse, be sure to have the life insurance policy ownership switched to your name. If you do not, your spouse, can, at any time, change the beneficiary listed on the policy and you may wind up with nothing to your name.
Besides this, there are some policies that have a cash value associated with them. If this is the case with your life insurance policy, then include the policy and the cash associated with it in your list of marital assets to be split between you and your spouse.
Getting divorced in California can be complicated. Download our free eBook, 18 Important Things to Know About California Divorce to educate yourself on the process.
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