Does a Divorce Decree Nullify a Life Insurance Policy?

By Tom Streissguth

The issue of life insurance is a central point in many divorce actions. If you are considering divorce, you will have to take into account ownership and designated beneficiaries of any life insurance policies. The marital settlement agreement will settle the status of the insurance and set out any requirements for how it should be handled after the court finalizes the decree.

The issue of life insurance is a central point in many divorce actions. If you are considering divorce, you will have to take into account ownership and designated beneficiaries of any life insurance policies. The marital settlement agreement will settle the status of the insurance and set out any requirements for how it should be handled after the court finalizes the decree.

Ownership

The owner of a life insurance policy is responsible for designating a beneficiary and paying the premiums. The policy can be canceled upon the owner's instruction at any time. The owner also has the right to change beneficiaries. Divorce or legal separation has no effect on life insurance, unless the policy is the subject of stipulations agreed to in the final divorce decree. Thus, divorce does not automatically remove an ex-spouse as a named beneficiary. In addition, a divorce decree may not transfer ownership of insurance.

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Beneficiaries

A divorce decree may stipulate that one spouse maintains a life insurance policy with the other spouse as a beneficiary. If minor children are involved in the divorce, the court may order that the non-custodial parent buy or maintain life insurance with the children as beneficiaries. This is to ensure any support payments that stop with the death of the paying parent are replaced. It is common for divorce settlements to decree the beneficiaries by name along with the minimum amount of the death benefit. The decree may also direct the custodial spouse to maintain life insurance with the children as beneficiaries.

Lapsed Policies

A divorce decree does not nullify the policy, but it may require that if the policy lapses and policy owner dies, the custodial or non-custodial parent (as the case may be) would be entitled to a portion of the estate equal to the death benefit in the lapsed policy. This way, a spouse who allows a policy to lapse despite the stipulation in a marital settlement still makes good on his obligation to provide a monetary benefit in the case of his death.

Contingencies

The divorce decree may also stipulate that life insurance on a former spouse can be canceled if that former spouse remarries or when the children named as beneficiaries reach the age of emancipation and the non-custodial spouse no longer owes child support for them. The decree may also set the terms of successor or "contingent" beneficiaries if the principle beneficiary of the policy dies.

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The Legality of Forced Life Insurance Policies in Divorce

References

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Kansas Regulations on Life Insurance Beneficiary Change Form Requirements

Life insurance protects your family from financial catastrophe should you die unexpectedly. It’s a replacement for lost income. Like other states, Kansas regulates life insurance through its statutes and through regulations issued by the state insurance commissioner. Life insurance proceeds pass to beneficiaries named in the contract and are not governed by your will. Changing a beneficiary is usually as easy as filling out a form, but not always.

Why is Life Insurance Such an Important Consideration in a Divorce?

In some cases, life insurance doesn't necessarily have any value as an asset in a divorce. For example, a term life insurance policy doesn't pay out or have any worth until the insured dies. Courts can – and sometimes do – order spouses to purchase or maintain life insurance policies as part of the terms of a decree, however.

Is Life Insurance Required in New York State Law in a Divorce?

Life insurance can play an important role in a divorce. A divorce court can require that an existing life insurance policy be maintained with the ex-spouse or minor children as beneficiaries. It can also order a divorcing spouse to obtain and maintain such a policy. However, obtaining a life insurance policy is not a general condition of a divorce in New York.

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