Covid-19 Update:

The Law Office of Andrew A. Bestafka, Esq. is taking a safe but proactive approach to the Coronavirus situation in our law practice. We are working every day to represent our clients. We are offering frontline healthcare workers at CentraState free Simple Wills. To read more please Click Here

The days ahead may be a challenge. But we will continue to work to take care of our client’s cases and to take on new matters and clients. We will simply manage your case in less traditional, more technology-driven ways, that are safer for your health and ours.

Please stay healthy and contact us if you have any questions or concerns regarding your case or a new matter for us to consider.

Andrew Bestafka, Monmouth County Divorce Lawyer

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Divorce, Custody & Family Law

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Life Insurance Policy Cash Value Attorney

Division of assets in a divorce can be a contentious affair, but it doesn’t have to be. Finding the right lawyer to work with you and your spouse can make all the difference. If you and your partner are ready to move forward with an equitable legal separation in New Jersey, contact the Law Office of Andrew A. Bestafka, Esq. as soon as possible. We have years of experience in every aspect of family law, including divorce, child custody, and spousal support. Don’t let a bitter divorce determine the course of your life. Call the Law Office of Andrew A. Bestafka, Esq. at (732) 898-2378 today for a confidential consultation.

Marital Assets and Life Insurance

In almost every divorce, the parties must divide all marital property and assets between them. In collaborative or uncontested divorces, this is a matter of the two sides sitting down and working things out between them, but it can be much more complex in contested divorces. A mediator, judge, or arbitrator will sometimes be needed to ensure property is divided equitably under New Jersey law.

The concerned parties or agents must decide what is separate property and what is marital property. Separate property is anything purchased or acquired before the marriage, or in some cases, an asset to which only one party contributed. Marital property is anything purchased or acquired during the marriage and owned by both parties.

Whether or not a life insurance policy is considered marital property depends on what type of policy was purchased and who purchased it.

Term life insurance, or a policy that expires after a set date, is the simpler of the two types to handle in a divorce. Most term life insurance policies work by paying a death benefit to a beneficiary if the policyholder dies within the set term, usually between ten and thirty years. People who choose this type of policy usually set the term end date after a significant expense has been paid off, such as after children have left home or a mortgage is paid.

Term life insurance has no cash value while you’re alive, so it isn’t usually considered a marital asset. Even if you purchased the policy while married, it would still be regarded as separate property because it has no value.

Whole life insurance, or permanent life insurance, can make equitable division more challenging. Permanent policies such as whole, fixed, indexed, or universal life insurance do not expire after a set term. As long as premiums are paid, these policies remain active. This means they can be considered a marital asset as they have a cash value.

Splitting a life insurance policy is not possible, so in most cases, divorcing couples will have to cash out the policy and split the proceeds between them. This is the most viable option as the policy proceeds can help cover legal fees or debts from a divorce, and removing the financial obligation of maintaining the policy may make negotiations for asset division easier for both sides.

Purchasing Insurance as a Condition of Divorce Negotiations

If children are a consideration, you and your former spouse may want to purchase new life insurance policies to protect them if something should happen to either of you. This is especially important if there is a spousal support or alimony agreement included in the divorce.

Suppose you have a financial obligation to your former spouse, or they to you. In that case, you may want to include a requirement to maintain life insurance as part of the divorce settlement to protect you and your family should anything happen to them after the divorce. In some cases, a judge may order both parties to purchase a policy as a condition of finalizing the divorce.

You may also consider taking out a new policy on your former spouse yourself, with their permission, if you’re able to pay for the premiums. Paying for the policy yourself allows you to protect your alimony, child support, or retirement benefits should anything happen to your former spouse and enables you to make any changes to the policy you wish without their approval. They would simply have to submit to a medical examination and sign the policy.

If there is an existing policy and your former spouse wishes to keep it active but not pay for it, you may wish to take over the premium payments to protect yourself.

Changing Beneficiaries on Life Insurance Policies

A divorce doesn’t automatically alter any policies purchased by either party. If you wish to change the beneficiaries designated on a policy, you must do so yourself by contacting the insurance company that manages it.

The catch is that in most cases, only the policyholder can change who receives the benefits. If your former spouse purchased a life insurance policy for you under their name, only they can change the beneficiary. You should attempt to take control of any policies covering you in divorce negotiations and make sure to designate your preferred beneficiary.

It’s important to note that if you owe alimony, child support, or spousal support as a condition of the divorce settlement, a judge may require you to keep your former spouse as a beneficiary of any life insurance policy.

Naming Children as Beneficiaries

While naming your children as beneficiaries on a life insurance policy may seem like the right choice, doing so may not be in their best interests. Most life insurance benefits cannot be paid to anyone under 18, so it may be a better idea to place any benefits under the control of a trustee to ensure your children are protected if the worst should happen.

Call the Law Office of Andrew A. Bestafka, Esq. Today

If you and your partner need assistance with division of debt, division of assets, adoption, or any family law, call the Law Office of Andrew A. Bestafka, Esq. today. We have the skills, experience, and qualifications to get you the outcomes you need. Don’t let a disagreement over life insurance end your relationship on a sour note. Call (732) 898-2378 for a confidential consultation today.