Why Life Insurance Can be Considered an Asset in Divorce
In order to determine a fair and equitable division of assets, all community and separate property must be considered. Life insurance is not often thought of in this context, but it should be.
If you or your spouse has a ‘whole life’ or ‘universal life’ policy, it has a cash value. That means that whoever is awarded that policy is receiving a monetary award whether or not the policy remains intact. If the policy is ‘surrendered,’ then the cash value is distributed and the policy is terminated; however, it may also be utilized to ensure support obligations are met if the policy holder dies.
A term life policy has no cash value but is often utilized by courts to secure financial obligations in the event of the death of the policy holder. This is true of many employer-sponsored plans. Rules will be implemented regarding payment of the premiums and the duration it must remain active. It is not treated as a divisible asset, but as a tool to ensure either the disadvantaged spouse and/or children are supported through their dependency.
It is important for both spouses to know if these policies exist and what coverage is provided during any dissolution or separation.
Our Family Law Group is available to assist you with all family law related matters including dissolutions, separations, support, and parenting plan matters. To request a consultation, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.