Divorce and How the Court Considers Life Insurance Policies

The issues that arise when a divorce court considers life insurance policies and benefits are many and varied. The recent case of Kearley v. Kearley, No. 97-05405 (Fla. Dist. Ct. App. Sept. 8, 1999), summarized the actions a divorce court can take with regard to life insurance policies and benefits as (1) treating the life insurance policy as an item of property to be classified, valued, and distributed; (2) treating the life insurance policy as a source of indemnity for unpaid obligations at the time of the obligor’s death; and (3) treating the life insurance policy as a source of security to minimize future harm to the obligee in the event of the untimely death of the obligor:

First, the cash surrender value of life insurance purchased during the marriage can be treated as a marital asset without restricting the owner’s future ability to select beneficiaries. Second, by compelling the policy’s owner to select the former spouse as beneficiary, the trial court can use the policy as security to indemnify the former spouse for any unpaid obligations arising from the final judgment, typically for alimony or child support due at the time the payor spouse dies. Third, the trial court can compel the owner to select the former spouse as beneficiary in order to minimize future economic harm to the surviving family upon the untimely death of a spouse who paid alimony or child support during his or her life.

Within the first category, i.e., division of the life insurance policy as a piece of property, the issues can be broken down further: Classification and valuation of the life insurance policy; The effect of a restraining order preventing a spouse from transferring property on the right to change the beneficiary; The effect of a divorce itself on a spouse’s rights as a beneficiary; The effect of a decree or separation agreement awarding a life insurance policy to one spouse on the other spouse’s beneficiary status; and The effect of a general waiver in a separation agreement whereby one spouse waives all rights flowing from the marital relationship on that spouse’s rights as beneficiary.

Within the second and third categories, the issues can also be broken down further: The authority of a court to order a spouse to name the other spouse as beneficiary under a life insurance policy to secure a property division, alimony, or child support; The extent to which a former spouse is entitled to the proceeds under such an order; and The effect of the failure of a spouse to comply with such an order.



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CHILDREN’S INSURANCE -- Divorcing parents must negotiate health and dental insurance for their minor children as part of their separation agreement. Sometimes the spouses negotiate a qualified medical support order, known as a QMCSO, which can be part of COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage that also protects the former spouse.

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