So you’re getting a divorce and want to know who gets custody of the life insurance. Well, the answer is- it depends. If you are in the process of getting a divorce, many states will put a restraining order on the policy. Doing this prevents either party from making any changes to the policy that may solely benefit them or be damaging to the other party. These benefits can often be used for alimony or child support. Even if life insurance policies are not being used to secure alimony and child support, many couples revise their policies so that their children are the beneficiaries. If your children are minors, you can appoint an adult custodian to receive and handle the benefits on their behalf –or better yet, put the life insurance in a special trust called an Irrevocable Life Insurance Trust.
If you are already divorced, this may mean that you need to establish a new policy that covers children that were not otherwise provided for in the policy. It is important for both parties to work with a lawyer who can guide you through the intricacies involved. You cannot keep the same policy and you certainly don’t want to leave your former spouse as the beneficiary of your life insurance. If you do keep the same policy and it is transferred to one party, you must insure that the policy is current. It is quite rare that the policy would be paid in full, so this would compel you to take over the payments in order to keep the coverage spelled out in the policy.
The end of your marriage can be a devastating life event so it is important that you investigate everything you need to know in order to protect your investment in life insurance coverage. You can do this by utilizing a competent attorney. It is also important to know what the tax consequences may be for your policy as they will differ based on who is the actual owner of the policy. In some cases, the death benefits can be totally tax free. You will need proper coverage and deserve the best option possible. Constantly reevaluate your situation and keep open communication with your ex when possible. It could save you a lot of money and anguish in the long term. If you continue to be a responsible and informed policy holder, a divorce will not leave you insurance-poor.