Why You Need to Have Life Insurance When You Divorce

There are some parts of the divorce that end when the divorce ends. For starters, the marriage is over. Once there is a resolution of the marital property issues, the actual transfers normally take just a few weeks or months. For example, the titles to assets such as the home, bank accounts, and vehicles can be quickly prepared, signed, and recorded. QDRO agreements should preserve a spouse’s rights to retirement benefits when those benefits vest.
There are two items though that will remain open for years or even decades after the divorce is finalized. Parents are normally required to pay child support until a child reaches the age of 18. A spouse may be required to pay alimony until he/she dies or until their spouse dies or remarries. A life insurance policy for the benefit of the spouse or child helps to protect those payments if the spouse who is obligated to make the payments dies before all the payments are due.
Life insurance for child support and childcare
The life insurance policy should be in the name of the person obligated to pay the child support. It should be clear that the beneficiary (the other parent, a court agency, or a third-party) has the responsibility to use the proceeds for the child.
Some of the factors that divorce counsel need to review are:
The amount of the support order. The amount of necessary life insurance may include benefits other than the core support order payment. For example, life insurance coverage should include health insurance for the child.
The length of time child support will be required. Normally, the amount of support starts with the current age of the child and lasts through the date the child turns 18.
Whether the child has any special educational or medical needs.
If the parents want to cover the cost of a college education or a trade-school education.
In addition to the concern that the parent who pays support may die prematurely, there is the concern that the parent who is raising the child may die prematurely. The life insurance proceeds should be enough to cover the costs of the payor spouse to raise the child. This is much more than just the amount of the support order because the payee spouse is normally paying a large part of the expenses to raise the child too.
The divorce agreement should resolve whether adjustments to the coverage can be made on a yearly basis since the amount of coverage should decrease each year.
Life insurance for alimony payments
Alimony (also called spousal support) should be secured by life insurance too. There are different types of alimony in Texas.
Rehabilitative alimony payments are made for a limited time so that the spouse receiving alimony can obtain an education or training so they can earn a living. There are strict conditions on when a spouse is entitled to rehabilitative alimony.
Permanent alimony. These payments are made normally if a spouse has a disability that prevents them from earning a living and the spouses have been married for a long time.
The amount of life insurance coverage should reflect the type of alimony a spouse is required to pay.
Additional life insurance factors
Generally, for both child support and alimony the amount of life insurance that is needed should be reduced to a current day value. The current day value should be the amount, that if properly invested, will pay the child support and alimony – as those sums become due. Life insurance isn’t simply a matter of multiplying the current order times the expected length of the order.
The health issues of the spouses also need to be considered. If a person is in ill health, obtaining life insurance may be difficult. In this scenario, a divorce lawyer may recommend that other assets be set aside to sure the child support or spousal support payments – in the event the payor spouse dies or can no longer earn a living.
Speak with a respected Texas family lawyer today
Experienced Texas divorce lawyers understand the need to anticipate the things that can go wrong even when spouses agree to the property division, child support, spousal support, and child custody issues.
At Lyttle Law Firm, we work to ensure your financial and emotional future based on the l needs and assets of everyone involved. We work to make sure the terms of the agreements and orders are enforced and that reasonable contingencies are addressed. To discuss your divorce issues, call our Austin and San Marcos family lawyers. We serve clients in Travis, Hays, Comal, Williamson, Bell, Caldwell, Burnett, Llano, and Guadalupe Counties. You can phone us at 512.215.5225 or use our online form to schedule an appointment.

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