Properly securing life insurance during a divorce proceeding ensures that alimony and child support are paid, even upon the death of a former spouse. The peace of mind and financial security it brings are just some of the many benefits of this agreement.
The divorce process in New York centers its focus on the division of assets between spouses and the structure of care for their children. This can be legally enforced through alimony and child support payments. But what about the unforeseen consequences that may occur outside courtroom? What if the paying spouse dies – what happens to the financial support of the surviving spouse and children? We recently addressed this question with clients and families the Queens area, and want to provide some helpful information about ways to maintain your family’s financial security.
A great way to safeguard child support and alimony payments in the event of the paying parent’s death is to secure them with a life insurance policy. Some spouses already have life insurance, while others who qualify for it can apply for new or increased life insurance coverage during the divorce proceeding. Life insurance policies are meant to cover the payor’s support obligation, thus covering the costs of raising a child in the event of the paying parent’s death.
Life insurance is meant to function as a safety net for families and spouses, but it is not required by law in the state of New York. Even though insurance isn’t a statute, spouses often work with their divorce lawyers in New York to secure and sign off on the proper life insurance policy during divorce negotiations. The separation agreement should address this topic and all its issues with a life insurance provision. This can help cover issues such as determining the beneficiary of a life insurance benefit, next steps if the payor changes coverage, and issues of a spouse eliminating coverage.
Determining a life insurance benefactor is one of the most common questions our office receives. There are several options: the insurance policy can be made payable to the child. This does bring up issues of handling the policy if the paying spouse dies before the child reaches the ago of majority. Or, the life insurance proceeds go to a pre-designated custodian is responsible for holding the insurance payout for the child’s benefit until he or she reaches the appropriate age. Yet another option is naming the ex-spouse as the beneficiary. However the proceeds may be affected by a bankruptcy, or the claims of that spouse’s current spouse. With all the benefits of life insurance come the added questions that go with it. Working with an experienced divorce attorney can help alleviate these issues while creating a financial solution that best supports the child and the payee spouse.