Proper Planning Is A Good Thing
A divorce situation is not something that most people take lightly because it involves issues that cut deep and are sometimes very difficult to deal with and resolve.
It is a rare instance when the noncustodial parent doesnt wish the best for his or her children.
Making sure that life insurance is in place for the welfare and benefit of the children is an important part of making certain that they are cared for, and even a term life policy to that end is a desirable end.
The simple thing to do is make the custodial parent the beneficiary of the policy, or a trust that is set up specifically for the purpose of providing money for child support in case the custodial parent somehow becomes unable to function.
Unfortunately, not all parents think things through rationally, and some things just do not get properly done.
In instances where a debt is considered to be a jointly held debt, the life insurance proceeds to a spouse, for example, could still be exempt from creditors, once again depending on the state of domicile.
This follows along with the concept that life insurance proceeds are for the protection of beneficiaries and are not subject to creditors.
There are instances, even in states where this is a precedent, where will attempt to attach liens against the bank accounts of beneficiaries if they know about such a life insurance pay off.
The best a creditor could do is watch the obituaries and attach the bank accounts of the beneficiary of the beneficiary.
Important Issues Regarding Divorce And Life Insurance
It is crucial to remember that when a former spouse is listed as the beneficiary on the ex-spouses life insurance policy, even when a new spouse is listed as beneficiary in a revised will, until the beneficiary is actually changed on the policy, life insurance proceeds will still be paid to the ex-spouse. If you are trying to decide between term life insurance and whole life insurance , experts typically will recommend term insurance. Term life insurance provides insurance protection at a significantly reduced premium cost, when compared to whole life insurance.
With term life insurance you are also able to choose decreasing insurance if you are the one who pays child support. This means the death benefits of the policy decrease as your children get older. If you are the parent dependent on child support, it is a good idea to ask for yearly confirmation that the policy is still in place, in order to avoid finding out at the worst possible time that the policy has lapsed due to non-payment. Some divorce decrees use the threat of a penalty to ensure the premiums are consistently paid and that the beneficiaries are not changed. Your Ayo and Iken attorney can answer any questions you may have regarding your life insurance and child support.
Do You Have To Name Your Ex As The Beneficiary
If you and your ex have a fairly contentious relationship, you may not be too inclined to want to name her/him as the beneficiary of your life insurance police. After all, what if the money is spent, not on the children, but on your exs new spouse? While you can name a minor child as beneficiary of your life insurance, the insurance company will not pay the proceeds directly to the minor child. In all likelihood, probate court would appoint an adult to handle the money until the child reaches the age of 18, and that adult could be the remaining parent. Naming the child as beneficiary means the life insurance proceeds would have to go through probatean expensive and time-consuming process.
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Child Support And Life Insurance Coverage
Child support payments are aimed at ensuring a minor child continues to receive support from both parents just the way he or she would have if the parents were still married to each other. One of the worries that a custodial parent may have at the time of divorce is: How will I support my child alone, if the paying parent dies before the completion of child support obligations?
To address this future uncertainty and to ensure that your child does not suffer financially in terms of support payments in the event of the death of the paying parent, you can buy life insurance coverage.
How Long Child Support Lasts
Generally, the law requires that the person paying child support continues to make those payments until any of the following circumstances apply:
- Your child is no longer a minor
- Your child becomes active duty in the military
- Your parental rights are terminated through adoption or another legal process
- Your minor child is declared legally emancipated by a court
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When The Child Is Named The Policy Beneficiary
Parents often feel that the best way to eliminate future possibility of conflict is to keep out of the insurance policy and name the child as the sole beneficiary. However, the hurdle in this approach is that the child will be considered a minor before he or she turns 18.
In the event of the policyholders untimely death, the proceeds of the life insurance coverage will go to the childs guardian appointed by the court . The guardian becomes the legal administrator of the insurance funds until the child attains the age of majority.
The second issue to consider is: Will your child be mature enough even at 18 to manage his or her life insurance funds securely? You should think through these issues before you name your child as the policy beneficiary.
Spousal Support Life Insurance
The obligation on a payor to provide spousal or child support to his or her dependents is one that the law takes very seriously. Whether in a separation agreement or as ordered by the court, the maintenance of a life insurance policy is a necessary security measure to ensure that the payors dependents, to whom spousal and child support is owed, are not left financially destitute in the event of the payors untimely death.
In fact, courts are given broad authority under family law statutes to not only order that a payor maintain his or her life insurance with the recipient as beneficiary, but also to direct a payor to obtain such insurance if he or she does not already have it, to secure the recipients source of support. This is a critical point. Not only are payors responsible for providing monthly support, but they will also have the added expense of monthly life insurance premiums, which can become quite expensive depending on the type of insurance policy obtained.
One way to keep these premiums minimal is to negotiate purchasing a fixed term policy that spans for just the duration child support or spousal support is owed.
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Life Insurance As An Aspect Of A Separation Agreement
Many couples choose to secure their support obligations through life insurance. Some already have life insurance. Others, who are medically qualified, may obtain new life insurance coverage or increased coverage at the time of the divorce. Providing life insurance policies to cover one’s support obligation is an excellent way to secure the costs of raising a child in the even of the paying parent’s death. The topic of support obligations following the death of the payor parent, with specific reference to life insurance, should be addressed in the separation agreement. What are the downsides to having the life insurance benefits paid to the child? What are the downsides/advantages of naming the surviving ex-spouse or surviving parent as the beneficiary of the policy? What are the benefits of having the life insurance policy proceeds paid into a trust? What happens if the payor parent changes coverage while alive, or eliminates the coverage? What happens if the payor parent changes the beneficiary designations? These and other issues can be addressed in a properly drafted life insurance provision of a separation agreement.
If you have questions about using life insurance to secure child support, you may want to consult an experienced family law attorney who can advise you on this topic and draft the settlement agreement on your behalf.
What Is A Child Support Lien
Filing a child support lien is governed by the Texas Family Code, Sections 157.311 through 157.331. Pursuant to the statute, the lien attaches to any settlement or proceeds of any claim for compensation. This includes claims for personal injury.
The purpose of the lien is to secure payment of delinquent child support payments.
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Can Child Support Take Life Insurance
- Asked May 22, 2013 in
Contact Jerry Vanderzanden, CLU, ChFC Contact Jerry Vanderzanden, CLU, ChFC by filling out the form below
Jerry Vanderzanden, CLU, ChFCPROCo-Founder, Coastal Financial Partners Group, CaliforniaThis is more of a family law question than a question that can be answered by life insurance professionals. You should contact an attorney with family law experience for advice. It is not unusual for divorce decrees to address and give direction with respect to how life insurance is to be handled.Answered on May 22, 2013+1
Contact David Racich Contact David Racich by filling out the form below
David RacichPROFountain Hills, ArizonaThe question is a little vague, but if you mean can life insurance be part of the child support arrangement as a component of custody, the answer is yes. Many attorneys require the spouse to carry life insurance on themselves for the benefit of the children for their ongoing support in the event of death. Answered on May 22, 2013+0view more answers by David Racich
Can Life Insurance Be Garnished For Debt
You purchased a life insurance policy as a way to provide your loved ones with financial security when you pass away. While your policy can help your surviving loved ones that are listed as beneficiaries, like most people, you probably arent aware of the fact that your policy can also benefit your creditors.
If you have a lot of debt and you are wondering if your creditors can go after your benefits, its important to find out if your policy and more importantly, your beneficiaries will be protected from creditors, and if so, whether or not there are limitations to those protections.
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How Is Child Support Calculated
In most cases, the amount of child support paid is based on the governments child support guidelines. These guidelines say that child support is usually made up of both:
Here are some examples of monthly child support payments based on the Table Amount for Ontario:
Contact The Social Security Administration
If the father worked for a significant period, then the custodial parent may seek payments from the Social Security Administration. The Social Security Administration pays out two different types of benefits upon a parent’s death: a one-time death benefit and/or a survivor benefit. Unmarried children under 18 years old are entitled to the father’s survivor benefits. If no spouse exists, then children also receive a one-time payment of $255.
To receive these benefits, the custodial parent must complete an application for benefits on behalf of the child within two years of the father’s death. Contact your local Social Security office to request the necessary paperwork and discuss your child’s eligibility for benefits.
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Can I Require My Spouse To Maintain Life Insurance To Secure An Alimony Or Child Support Obligation
Under North Carolina law, the obligation of a spouse to pay alimony, or a parent to pay child support, ceases upon the death of the obligor. Maintaining a life insurance policy in effect insuring the life of the supporting spouse or parent can provide a dependent spouse or custodial parent with valuable financial security in the event of the death of the supporting spouse or parent.
Judges in North Carolina do not have statutory authority to impose an obligation on a supporting spouse or parent to maintain life insurance in effect for the benefit of a minor child or dependent spouse. However, one of the many benefits of negotiating a settlement with your spouse is that you can agree to things that a judge does not have authority to impose. When parties negotiate child support and/or alimony, they can enter into a legally binding contract whereby the supporting spouse or parent agrees to maintain a life insurance policy in effect for the benefit of the former spouse and/or child until the alimony or child support obligation terminates.
If you are a spouse seeking alimony or a parent seeking child support, life insurance should be an important consideration in your settlement negotiations. When negotiating an agreement to maintain life insurance to secure an alimony or child support obligation, it is important to establish and clarify which party will pay the premiums and which party will be the owner of the policy.
Should The Recipient Ex
One way to prevent a payor from changing the beneficiary designation of a life insurance policy is to have the “recipient” own the policy. The payor would be the “insured,” but the owner of the policy would have the right to change beneficiaries. The question of who pays for the policy premiums could be addressed in the separation agreement.
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What Is Child Support
Child support is the money that a parent pays to another party who has physical custody of a child for the childs overall care. In some cases, where there is shared parenting time, the parent with the higher income pays the other parent-child support in order to maintain similar standards of living in both households. Child support payments tend to be administered every month, but this can change based on different factors.
Child support covers the following:
- The circumstances in which the child is currently living.
- Where the child is currently living.
- Certain medical care
- Education/Tuition expenses
- Any extracurricular activities the child may be involved in such as rep sports or tutoring
Please click here to view the full official government breakdown of the child support laws and regulations in Ontario.
Why Both Parents Should Have Life Insurance
Even if the parent who is not paying monthly child support payments is not court-ordered to maintain a life insurance policy, if you are that parent, ask yourself how your ex would be able to take care of the children in the event of your death. If you are the primary caregiver, it is important to calculate the cost of childcare, plus the costs your ex would incur if he or she were to have the children full-time. Just because child support payments or lack of those payments is not at issue, there is a fairly steep financial cost associated with childcare. Both parents, regardless of whether it is court-ordered or not, should seriously consider having life insurance for the benefit of their children, in the amount they can comfortably afford.
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The Child Support Lein Network
The Child Support Lein Network is a multi-state organization that is designed to work with the different states in the finding of insurance proceeds that can be utilized for the use in child support payments.
The bottom line is that various state agencies can join the CSLN network and inform local state officials when insurance proceeds are being paid.
Heretofore, child support authorities only learned of insurance proceeds coming into being by happenstance, and at these times judgments could be filed against the individual who would be receiving the insurance proceeds.
When states are a member of CSLN, then they can be proactive and file judgments in advance along with the limiting of certain state privileges such as drivers licensing, hunting licenses, professional licenses, and so forth.
The impact from CSLN is that the life insurance companies themselves will act to deduct back child support amounts owed prior to disbursing the life insurance proceeds to the beneficiaries.
The legal precedent in these cases is that since life insurance is regulated by the states, the states that do this are putting child support needs ahead of payment of the death proceeds to beneficiaries.
Are Life Insurance Policies Ever Susceptible To Creditors
While the state that you reside in does determine how protected your life insurance policy is from creditors, there are other instances that can make these policies more susceptible to creditors. For instance, if any beneficiaries of a life insurance policy are still living when the insured passes away and they have co-signed loans with you, creditors can file a lawsuit against the beneficiaries in order to receive the amount that is owed for the outstanding debts from the payouts of your policy. If any of the listed beneficiaries didnt co-sign any loans with you, but you have loans that are outstanding, your beneficiaries may have to use the payouts from your policy in order to cover the outstanding debt. They may also have to use some of the payouts to pay for any taxes that have been placed on your estate.
If you have named your estate as the beneficiary of your life insurance, or if the beneficiary you have named has passed away, your life insurance payouts are particularly vulnerable to creditors. For example, there is a chance that the assets listed in your estate will need to be liquidated in order to pay off any outstanding debts, which could include your life insurance. If this happens, any living beneficiaries will only receive a payout from your policy after your debts have been paid off.
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