When you’re getting a divorce, there are a lot of different financial considerations that you have to make, and issues can crop up in unexpected areas.
Consider, for example, your life insurance policies. Any significant life event – and divorce, in particular – should prompt you to review your policies and make sure that they continue to meet your needs. There are three important issues you may need to address:
1. Is your policy’s value considered a marital asset?
If you have whole life insurance, a standard universal life policy or another kind of permanent life insurance, its cash surrender value may be considered a marital asset.
That could mean simply giving up something equivalent to your spouse’s share of the money in your divorce settlement – or it could mean cashing the policy in and dividing the proceeds.
2. Do you need to change your beneficiaries?
Assuming you keep your policy and beneficiaries in place through the divorce, as often required, you will probably need to make some changes once the divorce is over.
As long as you have no agreement in place to keep your beneficiary designations the same, you may need to update your policy so that the money goes into a trust for your children or to someone other than your ex-spouse.
3. Should you buy more insurance to cover your obligations?
It’s not uncommon for one spouse to have to pay spousal support to the other – and you may also have support obligations for your minor children that continue well into the future.
Since life can be unpredictable, it’s not unusual for courts to require someone with one or more support obligations to take out additional life insurance that will cover their obligations if they suddenly pass away.
Working through the financial mechanics of divorce can be time-consuming and frustrating, but there’s no reason to do it alone. You can get legal assistance that will help you make certain that nothing is missed.