When it comes to a divorce Settlement Agreement, the checklist can be long. There are many aspects of your family and financial life that must be accounted for. One of them is life insurance. It shouldn’t be taken lightly.

The two of you must think about maintaining or obtaining life insurance coverage for each of you, to protect the stream of child support and/or alimony payments, college financial obligations (current or prospective), as well as to secure equitable distribution obligations between you. Though your marriage is ending, the two of you may have significant continuing financial ties. Alimony and child support payments alone may last for years, maybe decades, after the divorce is final. As important as life insurance may be during a marriage, it could be even more important to a dependent spouse or a spouse financially responsible for the kids, now or in the future, when the marriage ends.

If you receive support payments, they are critical to your ability to meet your monthly bills. If your ex-spouse unexpectedly dies, the financial results could be catastrophic for you. If your financial system is backstopped by life insurance, the blow of an ex-spouse’s death will be much less harmful, especially if your children are young and college looms in the future.

N.J.S.A. 3B:3-14 says a property interest that one spouse designates to a former spouse is automatically revoked upon the entry of a judgment of divorce, unless provided for in a court order or contract concerning the division of marital assets. Settlement Agreements incorporated into divorce judgments — and court orders created at the end of a trial — allow you to remain as the beneficiary of a life insurance policy after your divorce is finalized.

Written obligations are great, but they are made even better and stronger when your ex actually complies with the life insurance provisions of a Settlement Agreement.  This includes providing periodic information about the size of the policy and your right to claim insurance benefits if your ex dies before you do. This information also includes whether the policy is current, when premiums are due, whether they’ve been paid, and if any beneficiary designation or coverage amount has been changed contrary to the terms of the divorce settlement or order.  Typically, Settlement Agreements (or court orders) provide that a shortfall in coverage must be met from the decedent’s estate, before any named beneficiaries take under a Last Will. The contract takes precedence over the Will.  This is important information, but only if there is actually an estate from which to take.  Sometimes there is; sometimes there is not.

Skeptical spouses can negotiate to own the life insurance and pay the premiums (or have the insured ex pay for them), so the surviving spouse controls the life insurance and is not prey to an unreliable or vindictive ex.

These issues need to be raised during settlement negotiations, whether the couple has life insurance or needs to obtain more.

Once it’s known what information an insurance carrier needs to pay a death benefit, the appropriate documents can be prepared and consented to by the living spouses and signed. While creating releases allowing you access to your ex’s insurance information may seem like no big deal, in fact, when that information is required, even urgently, those documents may be the only way you can gain access to policy records and proceeds from the policy.

We recently had a case in which an ex-spouse was a drug abusing addict.  We had wisely included language in the Settlement Agreement that the Agreement itself could be used to gain information on the ex spouse’s life insurance policy.  When the ex-spouse balked at signing a Release running in our firm’s favor, we pulled out the Settlement Agreement and sent the key language to the carrier.  Voila.  The information doors opened and we (and our client) were treated as if he owned the policy.  We were able to protect him from the ravages of his uncooperative, unstable, non-premium-paying, and vindictive former spouse.  And we protected the parties’ children and their financial futures from almost certain ruin if the ex-spouse died.  Our client could not afford to pay for college on his own.

In the words of President Reagan, quoting from an ancient Russian proverb, you can trust, but you must verify. You need to trust your ex will comply with any requirements to carry life insurance, but also have the ability to get information periodically verifying the insurance is actually in place. If your ex isn’t complying with an Agreement, it’s vital to take action to force the issue early, while your ex is alive, than learn after his or her death that the mandatory life insurance policy beneficiary designations were changed, the amounts light, or the insurance policy cancelled altogether, whether for non-payment or otherwise.

If you are considering a divorce, or you have been divorced, and you have financial issues that need to be addressed (including life insurance), please call the Central Jersey law offices of Hanan M. Isaacs, P.C., at 609-683-7400, or contact us online.  We are compassionate counsel and tough advocates.  Go ahead and set up a near-term reduced fee initial consultation with our experienced legal counsel.  We will discuss your situation, explain the applicable laws, and advise you about your best options to protect your legal rights and financial interests, and those of your children.  Call now.  You will be glad you did.