Generally, if you have no plans to separate, your spouse will benefit from a life insurance policy's tax-advantaged cash value or death payout. In other cases, life insurance goes to the insured's estate after death or could be bound up in probate.
If the insured purchased term life insurance during the marriage and dies while married, the entire policy is considered community property, giving the spouse 50% of the death benefit if income earned during the marriage was used to pay premiums. The other 50% would go to the named beneficiary.
If you have a life insurance policy, you can maintain it to help provide financial support for your ex-spouse or children. In the event that the plan has a cash value component, it may be considered a marital asset and divided among you and your ex.
You can choose whoever you want to be the beneficiary. You can name a life insurance beneficiary in your policy, will, and/or trust. It depends on how you've set up your policy. If you have a joint life insurance policy with your partner, they will become your beneficiary after you die.
A life insurance beneficiary is a person or entity that can receive the death benefit if you pass away while your policy is still active. As a policyholder, it's your job to choose a beneficiary, which may be your spouse, adult child, or even a charity you support.
The two types of joint life insurance are first-to-die and second-to-die, or survivorship life insurance. A first-to-die life insurance policy pays out the death benefit when the first of the two spouses passes away, but a survivorship life insurance policy pays out the death benefit only after both policyholders die.
Frequently asked questions about life insurance and divorce
Every state is different, but any life insurance purchased during the marriage could be considered marital property. If so, your policy – and any built-up cash value – will typically be counted in with all your other assets that must be divided upon divorce.
Once the divorce is finalized, you won't be considered a family member anymore and won't be covered on the plan, says Katz. You'll have to find new insurance coverage and pay your own premium.
If you're the policyholder and won't be supporting your ex after the divorce, you might be able to remove them. But if you have to pay alimony or child support, you may have to keep them as a beneficiary. Consult your divorce lawyer to determine if it's possible to remove your ex from your policy.
So the answer is no, unless the beneficiary is changed, that is who will receive the money upon the account owner's death, regardless of a divorce.
If you can, consider assigning your spouse or partner as the primary beneficiary. This way, they can continue to handle your household finances and save money for your child's future. If both you and your partner or spouse pass away, the life insurance trust can kick in.
The simple answer is yes—you can buy life insurance for someone else if they agree and are aware of the decision. However, you can't buy a plan for anyone without an insurable interest and consent from the person you are buying life insurance for.
In community property states, a spouse is automatically considered the life insurance beneficiary unless they indicate explicitly otherwise in the policy. All property acquired during the marriage is considered jointly owned by both spouses, regardless of who earned it or whose name is on the title.
Whole Life Insurance is Almost Always Considered a Marital Asset.
A will won't supersede the beneficiaries listed on a life insurance policy. In most cases, the beneficiary listed on the life insurance policy has the right to claim the payout regardless of the instructions in the will.
Most men experience a 10–40% drop in their standard of living. Child support and other divorce-related payments, a separate home or apartment, and the possible loss of an ex-wife's income add up. Generally, Men who provide less than 80% of a family's income before the divorce suffer the most.
The Working Spouse Rule means a spouse of an employee may not use our health insurance plan as the primary coverage if the spouse works, is eligible for health insurance coverage through his/her employer, and the employer pays at least 50% of the total premium for “employee only” or single coverage.
However, the financial strain caused by divorce can sometimes meet the IRS's criteria for a hardship. For instance, expenses related to legal fees, settlements, or living adjustments required by a divorce decree might be considered.
Generally, once the policyholder dies, the death benefit is paid to the beneficiaries according to the state's laws with jurisdiction over the policy. When policies are active, only the policyholder can change the beneficiaries. In most cases and states, a spouse cannot override term life insurance beneficiaries.
The most equitable thing to do is to list the life insurance policy, including its cash value, among the marital assets to be divided. In a divorce in which assets are divided evenly, this means each spouse leaves the marriage with half the cash value from the policy.
The spouse and any dependent children also may be eligible to continue their existing health coverage for up to 36 months. The plan should notify them of their right to purchase extended health care coverage under COBRA.
The Special Death Benefit is a monthly allowance to an eligible surviving spouse, eligible registered domestic partner, or unmarried child under age 22 equal to half of the member's average monthly salary for the last 12 or 36 months, regardless of the member's age or years of service credit.
You need a life insurance policy worth 10 to 12 times your annual income. You can use our free term life calculator to find out exactly how much that is. If you're a stay-at-home parent, you need a policy worth $250,000–$400,000.
One or more heirs are usually named as beneficiaries on a life insurance policy, but they don't have to be. In fact, there are many reasons for naming someone other than your spouse or children as beneficiaries, including: You want to leave money to care for other family members, such as parents or a sibling.