With everything else to worry about during divorce proceedings, your life insurance policy might slip your mind. This is something you need to pay attention to, no matter which kind of coverage you have, and could potentially be considered an asset in your divorce case. If you are unsure of how your life insurance policy can affect your divorce settlement, do not worry. A Suffolk County property distribution lawyer can help you navigate this process and ensure that everyone you love is taken care of.
Does My Type of Life Insurance Matter?
The type of life insurance you are carrying can make a big difference here. One of the most common types of life insurance policies is term life. Even if you do not have one, you have no doubt heard countless commercials advertising them.
A term life policy lasts for a certain amount of time, a “term” of 10, 20, or 30 years. If you pass away during the designated period, benefits are paid out to your family. If you continue to live past the end of this term, there are no benefits paid out. Because of this, a term life insurance policy does not necessarily have value and is not seen as a potential marital asset.
A whole life insurance policy is seen as an asset though. That is because it is going to have to pay out at some point. It also builds up a cash value over time as you make payments. So this policy can be cashed in and split, or otherwise divided up in a divorce.
Do I Have to Name New Beneficiaries?
As we mentioned, it can be easy to overlook your life insurance in such a hectic time. The state of New York has noticed this problem. When you get a divorce, your spouse is now automatically revoked as the beneficiary on your policy. In some cases, a divorce agreement will keep your spouse as your beneficiary, but at least in that case your life insurance policy has clearly been discussed and no one has forgotten about anything.
It is important to remember that you are going to have to name new beneficiaries though. If you never name a new one, a court could decide who the policy should be paid to. Common choices for beneficiaries include:
- Adult children
- A custodian or trust that can manage the funds for minor children
- Your former spouse, who will be managing the funds for the children
You have some options here, so make sure that you take the time to pick out a new beneficiary and set some ground rules so that your family is still taken care of after you are gone.
Contact a Knowledgable Divorce Attorney
If you have any questions at all about your life insurance policy and how your divorce can affect it, contact Peter V. Mandi & Associates, Inc. We know that this is a confusing time and we’re ready to help you with the next steps.