Ask a Divorce Attorney in Hackensack, NJ: Using Life Insurance to Secure Alimony and Child Support Payments

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Anthony and Clarissa divorced after five years of marriage. At the time they divorced, Clarissa had just returned to work part-time. The couple had two children – Daniel, aged 2, and Esther, aged 4. In the financial settlement of the divorce, Clarissa received alimony for six years and child support as the primary custodian of the children.

To protect the alimony and child support payments, the spouses agreed to maintain a specific amount of life insurance to cover the child support payments in particular, in the event of an untimely death of one of the spouses. Each spouse had a separate policy and named each other as the sole beneficiary.

Unfortunately, Anthony did not hold up his end of the agreement and designated his new wife, Bethany, as the irrevocable beneficiary of his life insurance policy. Anthony did not provide Clarissa with any notice that she was no longer the beneficiary. Clarissa unknowingly maintained her life insurance policy, naming Anthony her beneficiary. Anthony passed away two years after he married Bethany. The alimony payments had already stopped, but seven years remained on his child support obligation. Clarissa sought to collect on the policy and was advised by the insurer that she was not the beneficiary.

This example is the worst-case scenario and is common when life insurance is used to secure alimony and child support payments following a divorce. More common is the scenario in which one of the spouses fails to maintain the life insurance policy and stops making payments. How can Clarissa avoid this situation?


Own the Life Insurance Policy

Following a divorce, it is not enough to stipulate or agree to maintain a life insurance policy against the former spouses to secure alimony and child support payments. The spouses must own the life insurance policy. The receiving spouse should own the life insurance policy because only then can he or she actually control the policy. If one of the spouses stops paying, she or he can make the payment and take them back to court to enforce payment. In the meantime, the policy is maintained. No changes can be made to the beneficiary if the receiving spouse owns the policy.


Thinking of Splitting?

The decision to file for divorce is one of the most important an individual will make in his or her life. The emotional aspects of divorce may take years to resolve. Filing a divorce action, however, means that immediate decisions need to be made such as termination of the marriage, division of assets, establishment of child custody, and determining your ongoing financial responsibility in the form of alimony or maintenance and child support, regardless of your emotions.

The Giro Law Firm provides legal services in a variety of divorce and family law matters, including contested divorces, prenuptial agreements, paternity testing, parental rights, adoption, spousal support, and civil union agreements. If you are contemplating filing a divorce, contact the Divorce Attorney in Hackensack, NJ at the Giro Law Firm to schedule a confidential consultation today.



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