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You May Not Care If Your Ex Lives or Dies, But Insure the Payments
Life insurance is one of those subjects few people want to think about most of the time. Fewer still take the trouble to review coverage and implement changes (and some still need prodding from the agent or financial planner). In the divorce process, life insurance on the ex-spouse who is responsible for alimony and/or child support is an often overlooked area in the divorce settlement. Just as when the spouses were married and perhaps starting a family, the underlying reason for insuring one's life is still very valid; having the mechanism to replace the income needed to support surviving dependents.
It's interesting to see spouses and their attorneys draw lines in the sand and then engage in strategic warfare over alimony or asset division, but fail to insure the payments the receiving spouse (and children) depend upon for living needs. The paying spouse may even intend to fully and faithfully comply with their obligations, but fate may have other plans.
Depending upon the payment period, the insurance may not be an insignificant amount either. For custodial parent receiving even a few years of monthly spousal support and child support for small children, the life insurance benefit may need to be $250,000 or more. To determine the appropriate amount, a calculation of "present value" may be needed that includes the desired monthly payments needed, inflation considerations and usually a rate of return assumption (conservative recommended). Term insurance (for the period of payments required) is usually a good and least expensive choice as well.
Don't forget to also include life insurance on a custodial parent as well. Their income and care-support for the child or children are valuable too, since the non-custodial parent may not be able to afford total care for the children by themselves either. In addition, "living" insurance, (such as disability and health insurance) should also be reviewed. An ex-spouse may have every intention of making alimony or child support payments, but if they cannot work due to illness or injury, these obligations may be suspended or cease altogether.
In determining child support, Rhode Island uses the Income Shares Model, which takes into account the amount of support that would have been available to the children if the marriage had not ended in divorce.
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"A Plain English Guide to Protecting Your Children"
Author: Mary L. Boland, Attorney at Law
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