When you are awarded alimony or child support in a divorce, it is important for the court to order the payor to take out life insurance to secure the obligation. Life insurance is needed not only to make sure a child has sufficient support in the event of the payer’s untimely death, but also to ensure the payment of court ordered spousal support.
Calculating the amount of life insurance needed takes several factors into account such as the amount of child support and other expenses parents are expected to pay until child is 18 or graduates high school. This includes standard support but may also include child care, medical expenses, activities, and school tuition.
Once a yearly figure is determined, it is often multiplied by the applicable number of years the child is expected to receive support. Younger children will require more years of support when compared to a teenager. Because the amount of life insurance needed is reduced as a child approaches adulthood, many agreements have a provision that allows the insured to decrease the face amount of the policy over time.
Alimony secured with life insurance is often based on present value rather than simply multiplying the court ordered amount by the number of years to avoid a financial windfall to the recipient should their ex-spouse die prematurely. In other words, the recipient’s benefit is what is actually due up until the time of death as opposed to taking out a high dollar policy to cover a decade or more of support.
Who is the beneficiary?
Typically with regard to life insurance to secure child support, the surviving parent is named trustee on behalf of a child unless an alternate or co-trustee is named on the policy.
What if life insurance too costly?
Sometime payors have compromised health or are older so getting a life insurance policy to secure alimony or child support is cost prohibitive – an undue burden on one party. It may be necessary to look at other security to ensure support obligations are covered.
Contact an Experienced Divorce Lawyer for Help
Many who receive child support and spousal maintenance may depend on it to make ends meet, so it is important to secure the obligation with life insurance to protect against the unexpected. If you have questions regarding protecting child support or spousal maintenance with a life insurance policy or other questions regarding divorce contact the family law offices of Jane Probst for more information today.