Life Insurance Beneficiary?

[bob523]

I heard that my wife would have to be named a beneficiary on my life insurance to protect her alimony after I die! How crazy is that??

[Trevor]

Some courts require the NCP to carry enough life insurance coverage to replace the outstanding CS obligation, but I haven't heard of cases where the same was required to meet an alimony obligation.

If you're required to do that, calculate the entire obligation ($n per month over y years of life expectancy) and cover only that amount. See the example below and adjust the beneficiary ratio every 6 or 12 months. No point paying her out $200k when the obligation is only 93% of that amount.

Handy with a spreadsheet?

Example:
Alimony at $500 per month ($6k/yr)
Life expectancy 30 years
Total obligation $186k
Life insurance payout $200k
Beneficiary ratio (STBX/your Dad) 93/7

Year 1
Alimony paid $6k
Obligation balance $180k
Beneficiary ratio (STBX/your Dad) 90/10

Year 2
Alimony paid $12k
Obligation balance $174k
Beneficiary ratio (STBX/your Dad) 87/13

[chi6488]

I am requesting that I am on stbx policy as well. We both already have a policy and are beneficiaries so not a big deal but she can't remove me later until the kids are emancipated.

[defaultuser]

If you can help it, I'd try and avoid the whole topic so it gets left out. The less you have to keep up with post divorce means less conflict.

[Trevor]

Default's right. Note the "if you are required [by the court] to do that" in my post as well.

My X's lawyer raised the issue but failed to include it in the decree, so I never had to worry about it, so I had my Dad as 100% the whole way.

[Southern.Putter]

I heard that my wife would have to be named a beneficiary on my life insurance to protect her alimony after I die! How crazy is that??

Who did you "hear" this from? Was it in the court order or the MSA? If not, file it under crazy and respond with radio silence.

If the issue does come up in any form of court-sanctioned negotiations, be sure to consider the following two issues, which any basic accountant or financial adviser can help you address:

1. If you are trying to cover alimony payments over a period of more than five or so years, be sure to use discounted cash flows. In other words, if you're going to try to cover the remote possibility that your policy will need to make 30 years of payments when you keel over tomorrow, that amount 30 years from now will only need a much smaller amount invested in the bank today in order to cover that payment 30 years from now, because that smaller amount will earn interest or income between now and 30 years hence. Here's the relevant Wikipedia article:
http://en.wikipedia.org/wiki/Time_value_of_money

2. As you and she both get older, the amount of the payout needs to decrease because it will not have to cover as many years of life expectancy. So, the cost of the policy should go decrease some over time. Again, a decent accountant or life insurance person can help you with this.

NOTE: Do not purchase a "whole life" insurance plan. Be sure that you only obtain "level term insurance" or "declining term insurance". The "whole life" plans also include an investment element. Those are almost _always_ very poor investments, not to mention the fact that your estate loses the investment element's balance when you die and the policy only pays out the benefit amount due.

Anyway, don't do any of this stuff unless it comes up in a court-ordered document or negotiation.

[Thoughts?]

Good advice on above posts.

CS is considered an obligation of the estate of a payor in many states, including TX, as in its specifically written into statutes. So a court is very likely to award a request for an insurance policy sufficient to cover that obligation.

On alimony, I could see it possibly being an obligation of your estate in some places, based upon either status or case law. Not saying I agree with it -- am simply saying based upon what I know as a layman, I can understand how that could happen.

As the others wisely point out, keep it to the minimum necessary.

Also, would encourage you to keep the emotions out of it. I do a lot for my kids, and therefore don't mind the $300 per year for the $150k term policy costs me to make sure any CS is paid that needs to be. You'd spend the annual premium for a term policy by spending an hour talking with your attorney about it. Ten years annual premium if its argued in court. Regardless of CS or alimony.

And personally, I have an additional $600k insurance that I buy voluntarily, with funds going into a trust that is controlled by my sister & my new wife, to be used only for the benefit of my children, to do things I'd do for them -- like help with their college educations & the purchase of their first home. The corpus of the trust does not revert ot them until they are 35, meaning they can't blow it, and my ex will likely be dead & gone when the cash becomes available.

It's all reasonable financial planning.

[bob523]

I already have the Life Insurance Policy - to take care of my kids. I narrowed the search and know what attorney I will be retaining when the time comes. He is the one who told me that they could request that I keep her on the policy to cover the alimony in the event of my death. I am in NJ and have been married 24 years - soI am looking at permanant alimomy.

[RC211V]

I'll ask my lawyer, but in the meantime, does anybody know about this in CA? I have a bit of ins.through my employer, but i want her off it after final, if I can...

[BubbaGumpShrimp]

I'll ask my lawyer, but in the meantime, does anybody know about this in CA? I have a bit of ins.through my employer, but i want her off it after final, if I can...

My divorce is in VA...but just speaking from personal experience...I took NJ off my life insurance literally the morning I packed my stuff and left. I drove straight to my office (with my dog ), logged on to the website, and removed her.

I would change it now (remove her) and go back and add what percentage the court deems necessary (if anything) later. As my STBX likes to say..."It's easier to ask for forgiveness than permission."