Life Insurance, Divorce, and Child Custody

There are many life milestones that are financially stressful. Divorce and the death of your spouse are assuredly two of those financially difficult times. During a marriage, a couple shares expenses, including bills, clothes, housing expenses, and the costs of raising the couple's children. When a couple divorces, they may still be tied together. This could happen because of shared financial obligations such as a mortgage, or more often, spousal support or child support obligations. But what happens if the paying spouse passes away while he or she still is supposed to be paying spousal or child support? This would obviously place an enormous financial burden on the survivor. To address this, the paying spouse is required to maintain life insurance.

In the case of spousal support, the amount or life insurance that a former spouse is required to carry will be dictated by the amount and duration of the spousal support award. The amount of life insurance must be enough such that if the paying spouse were to pass away, the receiving spouse would receive a life insurance pay out in the amount equivalent to how much he or she would have received if the deceased spouse had not passed. For example, if the paying spouse is ordered to pay $10,000 per year for ten years, then he or she might be required to maintain life insurance in the amount of $100,000. As the alimony balance goes down, the amount of life insurance coverage may be reduced as well. Typically the paying spouse needs to provide proof of life insurance to the receiving spouse. There are usually tax considerations in arriving at this number as well.

Similarly, if there is a child support order, the paying parent must maintain life insurance. This makes sure that the child's needs will be met even if the paying parent dies. The amount of life insurance to be carried is calculated based on the estimated amount of child support that will be paid over the years until the child is emancipated, which should also take into consideration such expenses as medical expenses and college expenses. Usually the beneficiary will be the child (or children) with the custodial parent named as trustee. Like spousal support, the paying parent needs to provide proof of insurance to the receiving spouse.

If you have questions about your rights and obligations after a divorce in terms of securing your financial future. Call us today at (732) 529-6937 and we can talk about your support obligations and your case.

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