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Child Support Life Insurance
Should You Own Life Insurance to Protect Alimony and Child Support?
Many people are are not aware that life insurance can actually be used as a part of a divorce settlement.
Though it’s easiest to include it as part of the divorce settlement, it can also be incorporated even after a divorce has already been finalized.
The main way life insurance is used in a divorce settlement is to protect alimony and child support.
How is Alimony and Child Support Determined?
Husband and wife separate. They are mature, responsible adults who want the best for their children, so they are able to quickly establish an informal custody schedule that enables both parents to spend meaningful time with the children.
Husband and wife both work, but husband’s earnings are far greater than wife’s. The parties agree, in principle, that husband will pay child support.
Husband consults with an experienced family law attorney to determine how much child support he owes.
Make sure you setup your life insurance policy correctly!
Your children are the main reason you bought your life insurance policy.
This means both the plan you buy and the way its set up must put your children first. You need to ensure they are the ones with access to the benefit, or at least the person responsible for the money can only use it as you intended.
Simply put, you must make sure your children are the only ones who will be able to utilize the money left to them from the life insurance policy.
Court ordered life insurance for alimony or child support
There are cases where the court orders the supporting spouse to own a life insurance policy. In these scenarios where children are involved, it would guarantee the ex spouse a lump sum of money if the supporting parent passes away.
Parents would generally purchase a life insurance policy for a certain amount of time depending on the ages of the child or children. Just as alimony payments are designated over a certain time frame, life insurance that is court ordered can be purchased for a certain number of years (term insurance) or a permanet policy can be purchased.
The question for the policy owner is what is the purpose of the poliy and what is it intended for? If a life insurance policy is supposed to be a safeguard for child support, it can be canceled when the dependent children reach the age of majority.
Life insurance and divorce settlements
Permanent life insurance policies like whole life, variable life or universial life insurance policies that can accumulate cash values can be drawn upon a divorce. Ideally, both beneficiaries and policy owners should be modified to account for changes in marital status.
Life insurance policies paying out the death benefit with the death of the insured will be payed out to the named beneficiaries. With that in mind, couples who do not want their ex spouse to receive the death benefit should change names.
In other cases where children are involved and parents who want their death benefit to be paid to their child or children should consult with an attorney to have a trust written and created on behalf of a minor.
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