Life insurance is an integral part of a divorce settlement. Frequently, life insurance policies in divorce are used to guarantee child support and alimony. The purpose of insurance is to provide for the children. Most people have their ex as the primary beneficiary to make sure they can keep the lights on without their ex-spouse. If the split is acrimonious and there are no children, you can change the beneficiary as you see fit.
It varies from case to case. Suppose you bought insurance while still married and named your spouse as the beneficiary in the event of your expiration. In that case, New Jersey courts use the revocation upon termination statute if the divorce is finalized. If your ex dies, you are still the beneficiary does not matter because the original contract is no longer valid. Courts in other places have ruled this decision cruel and contractually unfair, naming the beneficiary as the recipient of the proceeds of the life insurance policy as named before the ex’s passing.
If it is considered an asset, it will not be divided straight down the middle, 50-50. New Jersey is an equitable distribution state which means assets are divided as equally as possible. Sometimes policies have monetary value, and other times, they don’t. Your approach needs to be examined, and your lawyer will explain whether or not it is a financial asset. A whole life policy has cash value and can be cashed out and divided according to what is determined as equitable distribution. Term life insurance has no cash value and is usually not viewed as an asset. That doesn’t mean it can’t be figured into the divorce. The divorce judge may require the holder to keep it as a benefit for the children and the ex-spouse. Universal Life is a blend of whole life and term. The judge will interpret the contracts to decide whether or not it has monetary value.
It is common to list your spouse as your beneficiary, and it is essential to make sure your spouse and children are taken care of in case your spouse dies. The policy’s purpose is to make sure those financially dependent on the insured don’t have to worry economically. If your life insurance policy is not part of the divorce settlement, your lawyer will be free to update or cancel the policy. You can change the beneficiary should you so choose.
According to the rules that determine divorce and life insurance in New Jersey, the ex-spouse responsible for alimony and child support has to have a life insurance policy large enough to cover the total amount due until the children are adults and until alimony is paid in full. For example, Jimmy and Joan are getting a divorce. Jimmy is ordered to pay $2,000 per month between maintenance and child support. That would be a total of $120,000. Unfortunately, if Jimmy were to pass away three years after the divorce, Joan would receive $48,000.
In a recent case, Rice v. Webb, the court said the surviving ex-spouse was not entitled to life insurance benefits even though she was listed as the primary beneficiary. Dale’s estate filed a motion to prevent her from receiving any payout from the insurance policy, and they won. Brenda appealed the decision and lost for a second time.
The issue was not the policy or having Brenda as a beneficiary. The original judge said she would have won, but they agreed to give up all claims to the other’s retirement funds, stocks, insurance policies, and investments for the divorce settlement. The court said the most recent document superseded the life insurance agreement.
The court affirmed that Brenda’s only chance of receiving the life insurance benefits would have been without the settlement agreement.
The dissolution of a marriage is a stressful and painful time. Even the most amicable of separations can leave you utterly confused and exhausted. There is so much to nail down: child support, alimony, child custody, life insurance, and distribution of assets.
You need a lawyer who can navigate you through a divorce confidently, and strategically attuned to your goals and your key considerations. At the Montanari Law Group, we don’t make cookie-cutter divorce settlements or take the easy way out by avoiding litigation whenever necessary. Our New Jersey divorce attorneys want you to feel heard and know that your needs are being met. Our satisfied clients in North NJ towns like Wayne, Jersey City, West Milford, Woodland Park, and Haledon are evidence of our commitment while working on your case.
Contact us at (973) 233-4396, toll-free at (888) 877-7985, or look us up online to get started on a separation plan you have confidence in and feel is fair. We always provide a free consultation to address your divorce concerns.
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