Life insurance coverage is an important topic that must be addressed in the majority of divorce cases in Fairfield County, Connecticut. Experienced divorce practitioners are aware that life insurance coverage can present issues during and after a divorce case and are vigilant about ensuring that their clients are protected with respect to these issues.
During the Divorce
Many divorce clients in Fairfield County, such as Greenwich or Darien, have life insurance policies, or their spouses do. At the inception of the divorce case, it is important for both sides to ensure that whatever life insurance policies exist at the time of the filing are maintained throughout the divorce case. Life insurance policies owned by a party should be disclosed on his or her Financial Affidavit, but it is common practice for divorce attorneys in Fairfield County, Connecticut to request copies of all life insurance policies as part of their discovery requests. By reviewing the policies, the client and the attorney can discover what the terms of the policies are and what the coverage is, which is important to know for settlement negotiations and trial preparation. For example, if a party owns a term policy, one needs to know when the policy ends and if the premiums increase after a certain date.
It is critical for the client and the divorce attorney to ascertain who the beneficiaries of any life insurance policies are. People going through a divorce sometimes change the beneficiary of a life insurance policy during the pendency of the case from a spouse to another third party, such as a boyfriend, girlfriend, or another family member. In Connecticut, such an action is a violation of the Automatic Orders. If a divorce attorney discovers that the opposing party has changed the beneficiary of his or her life insurance policy during the pendency of the case from his or her spouse to someone else, or has let the policies lapse by failing to pay the premiums, he or she can file a motion in order to request remedies from the Court.
Whole life insurance policies with cash value are assets that can be divided in a divorce case. Usually the spouse owning the life insurance policy keeps the policy and the other spouse receives his or her share of the cash value by receiving more of another asset. Sometimes, parties cash out their life insurance policies at the time of the divorce and divide the net proceeds. Whether or not this is advisable is something that a party must discuss with his or her divorce attorney. Loans against the cash value of whole life insurance policies must also be considered as part of the final judgment.
Some Fairfield County divorce clients have life insurance trusts that own their life insurance policies. In those instances, the divorce attorney must obtain a copy of the trust in order to review the terms. Some life insurance trusts exclude the other spouse as a beneficiary upon the filing of a divorce action and others exclude an ex-spouse. It is advisable for divorce attorneys to work closely with the parties’ estate planning attorneys in order to determine the best way to address these trusts in the divorce action.
After the Divorce
Pursuant to Connecticut General Statutes Section 46b-82, life insurance can be ordered by a Court in a divorce case as security for a party’s alimony obligations. Life insurance is also commonly used as security for a party’s child support or college obligations. In more complicated cases, life insurance can be put in place as security for certain property division orders in the event that a party dies prior to distributing property to the other party.
Under General Statutes Section 46b-82, a party may not be ordered to maintain life insurance after the divorce if he or she can prove by a preponderance of the evidence that he or she is uninsurable or cannot pay the cost of the life insurance premiums. For parties with health concerns or who do not have the ability to obtain affordable life insurance because of their age or other reasons, it is important to plan to present evidence to the Court at the time of the divorce trial on this issue.
Connecticut law does state that a party’s obligation to maintain life insurance is modifiable; so, if a party experiences a substantial change in circumstances, such as the loss of a job, he or she has the right to file a motion in Court to determine whether his or her life insurance obligation can be modified.
Experienced divorce attorneys will include in their divorce agreements that a party who is ordered to maintain life insurance provide the other party proof at least annually that the life insurance is in place and that the beneficiary of the policy or policies is the other party. The party who is the beneficiary of the life insurance coverage should monitor this carefully after the divorce, as a lapse in coverage can be irreversible in some situations.
These are just some of the issues that can arise with respect to life insurance coverage. At Broder & Orland LLC, we are well-versed in life insurance coverage issues, whether occurring before, during, or after a divorce judgment, and can work with clients to ensure they are best protected.