Deciding what to do about a life insurance policy after a divorce can be a challenge. Try not to let emotions guide your actions and consider the overall impact of any moves you make.
Reassess your need for life insurance
life insurance policy is to provide for those who are dependent on you in the event of your untimely death. Often, that means your life insurance policy will benefit a spouse and children, if you have any.
After a divorce, it is wise to reassess your life insurance needs. Take a close look at those around you and think about how they would be impacted financially in your absence. If you have children, do your best to estimate how much they would need for their well-being until they can care for themselves. Run the numbers on your own or use an online life insurance needs estimator.
Be sure to seek guidance from an attorney before buying or changing life insurance policy coverage, so that you can be sure to act within the guidelines of your divorce agreement. Be sure to seek guidance from an attorney before buying or changing life insurance coverage, so that you can be sure to act within the guidelines of your divorce agreement. For instance, you may be required to carry a specific level of coverage until your children reach a certain age.
Think twice before changing your beneficiary
Proceed with caution before removing your former spouse as beneficiary of your life insurance policy if you have children together. Doing so may inadvertently result in your children not getting the financial assistance they deserve. Additionally, your divorce decree may require you to keep them as a beneficiary for a period of time. Also, you may consider naming a trustee other than your ex-spouse to administer the money. You may need to establish or revise your estate plan (your will) to fully accomplish your wishes.
Tips for naming a beneficiary if you have minor children:
- In many states minor children cannot receive life insurance benefits
- Consider a responsible adult who will care for your children
- Seek legal guidance as to whether you should set up a trust as beneficiary
Divorce can be a very difficult transition in life. If you do a little research and take time to act in the interests of those you love, it does not have to get the best of you.
Source: TIAA-CREF – Insurance Checkup: After a Divorce