Divorce will alter your life- both in the immediate and distant future. The changes that your life will undergo due to having gone through it can impact you positively and negatively. Regardless of the type of changes that your life undergoes, you need to be prepared for them. Thinking ahead and planning what you need to do in the face of these changes makes the most significant difference to your life and that of your family. Financial and emotional problems associated with divorce can be many- especially if yours is a particularly contentious divorce.
We have discussed many do’s and don’ts associated with getting a divorce in Texas the past few days. These tips have covered some of the more common problems and worries that are divorcing persons go through in connection with their case. Today I would like to cover additional tips regarding a subject that typically does not get much attention in contact with a divorce: insurance. While the issue of insurance may be bland and unexciting, the impact of making mistakes in connection with insurance and divorce can be profound.
A long way before your divorce is over with, and you should start to consider what changes need to be made (if any) to your insurance situation. You may need to purchase insurance policies, or you may need to change beneficiaries listed on another. Whatever the changes, additions, subtractions, or purchases that you need to make, the most critical piece of advice that I can give you is to start thinking about this subject early on.
Beneficiaries under health and life insurance will likely need to be revised in the wake of your divorce. If your spouse is listed as a beneficiary, you will probably not want them to remain as such after you are no longer married. It would be a shame to go through all the difficulties of divorce only to have your ex-spouse reap the rewards of an insurance policy when that was not your intent. It would help if you were intentional about your decisions when it comes to insurance.
Next, suppose you are fortunate enough to have children. In that case, you may realize that many of your insurance concerns will center around whether or not you are awarded primary conservatorship/custody of your kids in the divorce. Win immediate control of the kids, and they are of driving age. It may be your responsibility to put the kids on your car insurance policy to go to school and extracurricular events. Likewise, you and your ex-spouse will have your marching orders in place as to which party will provide health insurance for the children and which spouse will pay for that insurance or reimbursement the spouse who does pay for it. Your own insurance needs may change due to no longer being covered by your spouse’s insurance plan.
The reality of your situation is that you have many subjects and issues competing with insurance in your brain. Insurance is not something that we think about every day of our lives, but it touches and impacts every area of our lives. Depending on the outcome of your case, your insurance needs may change a great deal from before your divorce to the time when your divorce begins to wrap up. Let’s walk through some of the most important topics concerning insurance and how they relate to you, your family, and your divorce.
Do spousal maintenance, contractual alimony, or child support payments need to be protected?
Suppose you are awarded primary custody of your children, which means that they will come to live with you on a full-time basis. Their daily needs will be met by you paying for clothing, shelter, and food. As such, you will likely receive child support from your ex-spouse to assist you with raising the kids and to “even out” the responsibilities and burden of paying for the various necessities of life.
The other thing to remember is that you may also need support from your ex-spouse to meet your own minimal, reasonable needs in the months and years after your divorce. If your ex-spouse is found to be able to pay any sums of money towards this end, they may also be ordered to pay you spousal maintenance. Alternatively, they may agree with you in mediation to make alimony payments for a certain length of time.
You don’t want to put yourself in a position where you are reliant on another person for income, and then something happens where they are unable to make the payments agreed to in the divorce. A most unfortunate situation would involve the passing away of your ex-spouse that resulted in their inability to pay you child support or spousal maintenance by their estate.
For this reason, many folks agree to have life insurance be a part of the divorce that insurance the life of the spouse responsible for making this child support and spousal maintenance payments. Life insurance is intended to provide a specific amount of money for the policy’s beneficiary when the policyholder passes away. You would be named as the beneficiary under the policy. Once proof of death has been provided to the insurance company, you would receive a check or be wired the insurance for the amount of money.
From there, you could invest that money however you choose. Hopefully, the result is a steady stream of income that you and your child can live off of as long as you need to. You should meet with a financial advisor or meet with your existing advisor about the possibilities associated with these sorts of scenarios and what you would like to do if something happens where you come into ownership of a policy like this.
Special considerations for custodial parents in a Texas divorce
If you are receiving alimony payments or child support, you should purchase a life insurance policy on your ex-spouse. In this way, you can take the bull by the horns and protect yourself and your kids if something were to happen. You can see from the section before this one that it is possible for you to be seriously harmed when your ex-spouse passes away and the income you were to receive passes along with them.
If you cannot purchase a life insurance policy on your ex-spouse, you should try and negotiate to have the policies that he or she currently holds transferred into your ownership, where you can be listed as the beneficiary under them. This is not a discussion that you should initiate on the day of divorce mediation for final orders. Instead, this is a best discussion over several weeks to have your spouse warm up to that idea.
You would take over the yearly premium that is paid on the policy. If you are unable to make those payments you can ask the court to have the amount of child support, or spousal maintenance increased to cover the cost of whatever it takes for you to pay those life insurance premiums.
Special considerations for noncustodial parents in a Texas divorce
Protecting your kids financially is essential even if you are not the parent who has primary custody of them. It is possible that you not only have to pay child support for the benefit of your kids, but you may also be responsible for paying your ex-spouse maintenance or alimony. As I have already covered in this blog, you should consider buying a life insurance policy with yourself as the insured party. Term life insurance policies are competitively priced these days and can cost relatively little if you are in good health.
You ensure that your children are protected financially if something happens beyond your control by purchasing a life insurance policy. Premiums paid may be tax-deductible, but you will want to check with an accounting professional to verify that this is the case. The key to this discussion is that there is less need to have life insurance as you grow your wealth. You can self-insure yourself against situations like this. If you have a couple of million dollars in the bank and have will that state your children (or a trust) will inherit that money upon your death, there is little need for an additional life insurance policy on top of that?
How to change a life insurance policy beneficiary at the time of your divorce
When your divorce case comes to an end and the judge grants the divorce itself, you may have questions about how to proceed regarding any existing life insurance policies. If you need to change the beneficiary on a policy, you need to take a pretty straightforward path to do so. First, you should call the insurance company whose policy is through and tell them of your intent to change the beneficiary on your policy.
For the most part, you can designate any person you would like to be the beneficiary of under a life insurance policy. Suppose the family court has ordered an existing life insurance policy to continue with your ex-spouse as the beneficiary. In that case, you are legally unable to make this sort of change. If you are not bound by a court to list your ex-spouse as the beneficiary, the best route for you to take may be to name a trust as the beneficiary who will oversee the money until your children turn 18.
Issues related to health insurance and divorce in Texas
If you have a health insurance plan through work and provide coverage for you and your spouse, this section will be of particular interest. When you get a divorce, then your spouse will likely no longer be covered under this policy. Your spouse can gain coverage through COBRA, which allows them to continue with range for a certain period. Often, however, the costs associated with COBRA are significant, and many folks cannot make those payments. It would help if you spoke to your human resources coordinator to see what may be available to your spouse after the divorce. If they can continue as insured even after the divorce, you would want to know this.
Issues related to ensuring the property and your divorce
Only the property owner can purchase and hold an insurance policy that covers that particular piece of real or personal property. So, if ownership of a piece of property has changed due to the divorce, you may need to contact the insurance policy held on it to notify the insurance company of that change. If you have to move out of the marital residence due to the divorce, it is recommended (and may be required by a lessor) for you to have renter’s insurance covering the contents of your apartment or rental unit.
Questions about insurance and divorce in Texas? Contact the Law Office of Bryan Fagan
The attorneys with Bryan Fagan Law Office offer free of charge consultations here in our office, six days a week. These consultations are an excellent opportunity for you to ask questions and receive specific feedback about your circumstances. We appreciate the opportunity to share information with you here and look forward to discussing with you how our office can best serve you and your family.