When you go through a divorce, you’ll likely have many questions to which you need answers. Issues such as custody, support and property division may be things you’ve never had to deal with before and they can be confusing. One issue which doesn’t get as much attention is that of life insurance policies – lots of people have them, but what happens to them during a divorce?
Are life insurance policies marital property?
They can be, particularly if the policy has a cash value which can be collected during the life of the insured. The cash value can be classified as marital property, rather than separate property, and subject to equitable distribution between the spouses. This means the court will consider it a part of all marital assets and it will be factored into how the court orders division of those assets.
What if my spouse is the beneficiary?
Many married couples take out life insurance policies and name their spouse as the beneficiary of that policy. What you may not be aware of is that, as soon as the divorce is finalized, New York law automatically revokes your spouse as beneficiary. In fact, the law treats your spouse as if they were deceased before you. For example, if you divorced but never changed the designation of your spouse as beneficiary, and then subsequently passed away, New York law distributes the proceeds of your policy as if you spouse had already passed away as well.
Life insurance and child support
Another aspect you may not be aware of is that the court will sometimes require a divorcing spouse to acquire a life insurance policy for the benefit of their children. When the court orders that child support is to be paid, it may conclude that a life insurance policy is necessary to secure the child’s financial future. When it does, the court can order that, in addition to paying regular support, a spouse must take out a life insurance policy to guard against the possibility that the spouse may pass away before the child reaches the age of majority.