The Implications of Life Insurance after Divorce
Life insurance is an investment that many people make as a way to protect their loved ones, including spouses and children, in the case that something unexpected happens to them.
When a marriage is a thing to die, however, the question remains: what happens to the life insurance policy? There are a couple of primary happenings with life insurance policies that we’ll look at today; read on to learn more.
What happens to life insurance after divorce in New Jersey?
Because a life insurance policy is personal, and it is contributed to by only one individual (and not the couple) throughout the course of the marriage, it is considered individual property, not marital property. This means that in a divorce, the person from whom the life insurance policyholder is divorcing has no claim to any funds that have been contributed to the life insurance policy. The policyholder had likely named their spouse and/or any children as beneficiaries to the policy during the marriage. They are within their right to change the beneficiaries of the policy at any point, and, in the case of divorce, they will likely do so.
Can you claim life insurance after a divorce?
There have, however, been cases in which a policyholder has divorced their spouse, failed to change the beneficiary from the ex-spouse to someone else, and then they have died. The question that remains in this situation is, can the ex-spouse – whose name is legally outlined as a beneficiary of the insurance policy – claim the life insurance funds? The answer would be an obvious yes, correct? Well, not so fast.
Such cases have littered courts around the country. One Minnesota case was taken all the way to the U.S. Court of Appeals, where it was ultimately determined that the claimant did have the right to her dead ex-spouse’s funds because she was still listed as the beneficiary after their divorce and his death. In the lower courts, the revocation-upon-divorce statute in Minnesota held that “the dissolution or annulment of a marriage revokes any revocable…beneficiary designation…made by an individual to the individual’s former spouse.” This revocation of beneficiary designation was overturned by the U.S. Constitution itself, as it was determined that the contract rendered by the spouse naming his wife as beneficiary was legal and irrevocable unless done so by the policyholder himself.
However, in New Jersey, which also has a revocation-upon-divorce statute, a similar case of an ex-spouse seeking the life insurance payout for a deceased ex’s policy was denied. There is, however, another case in which one can claim life insurance after divorce.
Can NJ courts implement life insurance obligations?
Some of the elements that are hashed out in a divorce include child custody, child support payments, and spousal support (alimony) payments. In some cases, parents who owe child support payments and alimony become delinquent, falling back in their payments. One of the ways that many New Jersey Superior Court: Family Part judges handle this delinquent payment is to require that a divorcee with financial responsibilities mandated by the court take out a life insurance policy. This life insurance policy, then, is collateral against which the required payments will be made. In some cases, if the life insurance provider allows it, the policy is taken out in the custodial parent’s name. In other cases, they are listed as the beneficiary. When a paying ex-spouse remains delinquent on keeping up-to-date with alimony, child support, or life insurance payments, the court can issue financial sanctions.
Given that the revocation-upon-divorce statute does not so cleanly determine whether a prior beneficiary will remain so after divorce, it is essential that you have a skilled and experienced divorce and estate lawyer on your side if you are seeking a life insurance payout from an ex.
Talk to our team about whether life insurance counts in your divorce
Having the support of an experienced divorce attorney can mean the difference between protecting the financial wellbeing of your family and finding yourself facing someone who is holding out against meeting even court-ordered obligations. You and your children deserve the guidance a family law attorney can provide for how to protect your own and perhaps even utilize your ex’s life insurance policy to get your children’s needs met.
Make sure you have a skilled family law attorney on your side. At Bronzino Law Firm we understand how important it is to protect your finances, including your life insurance. We successfully represent clients Rumson, Sea Girt, Oakhurst, Neptune, Mantoloking, Toms River, and other towns in Ocean and Monmouth Counties to ensure that the best interests of your family are protected.
Contact us at (732) 812-3102 for a free consultation to discuss your divorce today.