Why do I need to protect the receipt of my alimony and/or child support payments?
Alimony and child support payments will both die when your ex-spouse dies. If he/she cannot work due to an accident or sickness, they may no longer be able to make those payments
What can I do to make sure those support payments are protected?
Life insurance protects alimony and child support payments if your ex dies.
Disability insurance protects against the loss of your ex’s income if he/she is unable to work due to injury or sickness. Statistics show that someone is much more likely to get sick or injured than to die, so it’s really important to have disability insurance in addition to life insurance.
How does life insurance protect my alimony and/or child support?
Your Divorce Settlement Agreement should require your ex-spouse to maintain a life insurance policy for as long as support is owed. (It’s up to you and your divorce attorney to make sure it’s included in your settlement agreement). If your ex dies, the death benefit is used to replace the remaining alimony and/or child support payments due. The policy amount and length are usually tied to the support terms in your Divorce Settlement Agreement.
As the recipient of these support payments you should, if possible, own the life insurance policy on your ex’s life to make sure the policy is paid and remains in effect and that no changes to the beneficiary designations will be made.
How does disability insurance protect my alimony and/or child support?
If your ex-spouse becomes disabled and can’t work due to injury or sickness, their income may drop or disappear. A properly structured disability policy can replace a portion of their income so they can continue paying alimony and/or child support instead of falling behind or asking the court to reduce or eliminate their support obligations.
A group disability policy that your ex might have through his/her employer is probably insufficient to protect your alimony and/or child support payments.
Who should own and control the life insurance policy – you or your ex-spouse?
For maximum protection, it’s much better if you, as the recipient, own the policies. If your ex owns the policies, he/she could reduce the coverage, cancel it or change the beneficiaries without telling you.
How much life insurance is enough to secure my receipt of all alimony and/or child support payments?
Typically, the life insurance death benefit amount is calculated by taking the following into account:
– Total amount of alimony payable over the entire term
– Total amount of child support payable to the age of emancipation for each child (which in most states is 18 or 21)
– Any extra needs: college, special needs care, outstanding mortgage balances, etc. – all of which are subject to negotiations.
Do all states require life and/or disability insurance to protect support payments?
No. Some states and judges might require life insurance to secure support payments; others treat it as optional. Disability insurance is less commonly ordered but it should definitely be requested by you and your attorney. As stated earlier, statistics show that someone is more likely to get sick or injured than to die, so it’s really important to have disability insurance in addition to life insurance.
What happens if my soon-to-be ex can’t qualify for life or disability insurance?
If age, medical or financial issues make coverage impossible or too expensive, you should consider alternatives, such as:
– More assets or cash up-front as part of your divorce settlement
– Different support structures, such as a Single Premium Immediate Annuity which will provide a guaranteed, fixed monthly income for a specified term
– Shorter support term but higher monthly amount
– Any combination of the above
All of this is very case-specific, so please contact us to help you with your specific situation.