Death and Insurance Policies Regarding Child Support
Key Points
  • When a life insurance policy is ordered by the court to cover child support obligations, once the child reaches the age of majority, the child no longer can recover any proceeds from the life insurance policy.
  • When drafting a Marital Settlement Agreement, it is important to specifically set out any terms of life insurance, how long, what amounts, and sole irrevocable beneficiary. In the instance of the paying parent dying, if the child is close to majority, the terms may be argued since the support obligation had been paid to the date of the paying parent’s death.
  • Make sure there is specific limitations as far as the beneficiary to a life insurance policy is concerned; otherwise contrary to what you might think, the entire amount of the insurance proceeds will be paid to the named beneficiary.

When the court order or agreement clearly and specifically limits the insured spouse’s obligation to maintain life insurance to a support obligation, many courts will similarly limit the right to recover the proceeds so as to satisfy the dollar amount of the support obligation, leaving any excess coverage to any other designated beneficiary under the policy or to the insured’s estate. Carbonell v. Carbonell, 618 So. 2d 326 (Fla. Dist. Ct. App. 1993); In re Estate of Monreal, 422 Mich. 704, 375 N.W.2d 329 (1985); Serrano v. Hendricks, 400 N.W.2d 77 (Iowa Ct. App. 1986). Courts will also find that a child’s right to recover the proceeds lapses upon the child’s reaching the age of majority. Cohn v. Metropolitan Life Insurance Co., 202 Ill. App. 3d 86, 559 N.E.2d 790 (1990).

Thus, if a support obligor dies when the child for whom support is secured is only one year from reaching the age of majority, it can be argued that the child is entitled only to one year’s worth of support from the insurance proceeds. See Head v. Metropolitan Life Insurance Co., 449 N.W.2d 449, 456 (Minn. Ct. App. 1990) ("The purpose for which the obligor is required to maintain insurance governs the determination of how much of the proceeds the obligee receives. This is a logical, common-sense approach."). Sometimes policies increase in value from the time of the decree. To resolve disputes over the increased value, the courts will look to the terms of the order or agreement to determine the extent of the insured’s obligation. For instance, in Carland v. Metropolitan Life Insurance Co., 727 F. Supp. 592 (D. Kan. 1989), the decree required that the wife be named sole irrevocable beneficiary to certain life insurance policies then held by the husband. The decree indicated the present value of the various policies. One policy was listed as providing the spouse the current value less $1,000. At the time of the decree, the policy had a present value of $14,000. At the time of the insured’s death, the policy had a value of $51,480. Before his death, the insured attempted to list his second wife as the beneficiary of the increased value. The court awarded the entire proceeds to the first wife, stating that since the decree required the husband to name his first wife as the sole irrevocable beneficiary he no longer had the power to name any other person as a joint beneficiary.

In the absence of a specific limitation, the court will award the entire amount of the promised insurance proceeds, despite the fact that the recipient will receive more upon the death of the insured than he or she would have received had the insured survived. See Head v. Metropolitan Life Insurance Co., 449 N.W.2d 449 (Minn. Ct. App. 1990) (no implication that obligation to secure support obligation with insurance was intended to mean that insurance was equivalent to support obligation); Kelley v. Medical Life Insurance Co., 31 Ohio St. 3d 130, 509 N.E.2d 411 (1987) (decree requiring that children be named beneficiaries for so long as husband’s support obligation existed related only to duration of insurance mandate and not to amount payable to children); Wendell v. Sovran Bank/Central South, 780 S.W.2d 372 (Tenn. Ct. App. 1989). One means to avoid future litigation in this area is to include a provision in the decree or agreement to the effect that the amount of insurance required to be maintained will decrease with each support payment. In re Estate of Tanenblatt, 109 Misc. 2d 490, 609 N.Y.S.2d 532 (Sur. Ct. 1994).

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ALIMONY PROTECTION -- Courts sometime require a spouse to maintain life insurance to protect his or her former partner’s alimony. The payor is required to maintain insurance for the payee’s benefit.

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