Divorce will alter your life- both in the immediate and distant futures. The changes that your life will undergo as a result of 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 trying to plan in advance what you need to be able do in the face of these changes is what makes the biggest 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.
The past few days we have discussed many do’s and don’ts associated with getting a divorce in Texas. These tips have covered some of the more common problems and worries that 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 connection with a divorce: insurance. While the subject of insurance may be bland and unexciting the impact of making mistakes in connection with insurance and divorce can be profound.
A long ways before your divorce is over with 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 important piece of advice that I can give you is to just 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. This is because if your spouse is listed as a beneficiary you will probably not want him or her to remain as such after you are no longer married. It would be a shame to go through all the difficulties of a divorce only to have your ex-spouse reap the rewards of an insurance policy when that was not your intent. You need to be intentional about your decisions when it comes to insurance.
Next, if you are fortunate enough to have children then you may come to the realization that many of your insurance concerns will center around whether or not you are awarded primary conservatorship/custody of your kids in the divorce. If you win primary custody of the kids and they are of driving age it may be your responsibility to put the kids on your car insurance policy so that they can drive 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 as a result of 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 in relation to 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?
In the event that you are awarded primary custody of your children that 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 in order 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 keep in mind is that you may also need support from your ex-spouse in order 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, he or she may also be ordered to pay you spousal maintenance. In the alternative, he or she may agree with you in mediation to making alimony payments for a certain length of time.
What you don’t want to do is put yourself in a position where you are reliant on another person for income and then something happens where he or she is 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 not being able 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 who is responsible for making these child support and spousal maintenance payments. Life insurance is intended to provide a specific amount of money for the beneficiary of the policy when the policy holder 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 amount of money.
From there, you could invest that money however you choose. The end result is hopefully 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 sort of scenarios and what you would like to do in the event that something happens where you come into ownership of a policy like this.
Special considerations for custodial parents in a Texas divorce
In the event that you are receiving alimony payments or child support it is advisable for you to 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 in the event something were to happen. You can see from the section prior to 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 him or her.
In the event that you are not able to 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. Rather this is a discussion that is best had over the course of several weeks in order to have your spouse warm up to that idea.
You would take over the yearly premium that is paid on the policy. In the event that you are unable to make those payments you can ask the court to have the amount of child support or spousal maintenance increased in order 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 important 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.
By purchasing a life insurance policy, you are insuring that your children are protected financially in the event that something happens beyond your control. Premiums paid may actually 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 as you grow your personal wealth there is less of a need to have life insurance. You can self-insure yourself against situations like this. If you have a couple million dollars in the bank and have will that states 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 in regard to any existing life insurance policies. If you need to change the beneficiary on a policy there is a pretty simple path that you need to take in order to do so. First, you should call up the insurance company who your 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 under a life insurance policy. In the event that the family court has ordered that an existing life insurance policy must continue on with your ex-spouse as the beneficiary then 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, then this section will be of particular interest to you. When you get a divorce then your spouse will likely no longer be covered under this policy. It is possible for your spouse to gain coverage through COBRA, which allows him or her to continue on with coverage for a certain period of time. Often times, however, the costs associated with COBRA are significant and many folks are not able to make those payments. You should speak to your human resources coordinator to see what may be available to your spouse after the divorce. If he or she is able to continue on as an insured even after the divorce you would want to know this.
Issues related to insuring property and your divorce
Only the owner of property can purchase and hold an insurance policy that covers that particular piece of real or personal property. So, if ownership to a piece of property has changed as a result of the divorce you may need to contact the insurance policy held on it to notify the insurance company of that change. If you are having to move out of the marital residence as a result of the divorce it is recommend (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 the Law Office of Bryan Fagan offer free of charge consultations here in our office, six days a week. These consultations are a great opportunity for you to be able to ask questions and receive specific feedback about your circumstances. We appreciate the opportunity to share information with you here and look forward to being able to discuss with you how our office can best serve you and your family.