Life Insurance and Marital Assets: Another Divorce Consideration

In Pennsylvania, marital assets are distributed with the “equitable distribution” model. However, this does not mean that all assets and debts should be divided in half. And one of the most complicated factors in managing estate assets after filing a divorce is managing life insurance policies. But knowing how a life insurance policy may be counted in marital assets is critical.

Is life insurance considered a marital asset?

In general, term life insurance won’t be treated as a financial asset in divorce proceedings. However, the cash values of a permanent policy may be considered a marital asset. What you’ll need to do in the process is review the terms of the policy and who your listed beneficiaries are-specifically your ex.

If you carry a term life insurance policy, there is no cash value. Instead, they are pay-out at death–meaning there is no value when you are alive.

While there are many financial factors and requests that come to mind when filing for divorce, life insurance is another to ask for. Life insurance can protect alimony and child support payments as well as protect pension and retirement funds.

Every divorce is different, but that doesn’t mean you don’t have options to manage your financial affairs.

Updating the Beneficiary of Life Insurance Policies After Divorce

Divorce does not automatically change or invalidate the beneficiary of your life insurance policy like other estate planning tools do. In order to make adjustments to your life insurance following a divorce, you’ll need to contact your life insurance company. The process for updating beneficiaries will be dependent on the specific company you use, the policy you hold, and the beneficiary you had originally assigned.

Some couples may opt to change their life insurance policies to benefit the children upon death. But you need to be mindful of the fine print that could result in your child missing out on benefits should you pass before the child turns 18.

Another factor to consider is how you listed your beneficiary. If the beneficiary was an irrevocable beneficiary, they cannot be removed from the policy without their consent. In addition, if your ex-spouse took out a life insurance policy that gives them a payout at the time of your death, they can still keep that after divorce.

No matter what your policy says, the beneficiaries listed, etc., you need to have a plan to handle life insurance policy disputes when divorce occurs.

Life Insurance and Marital Assets

At Kalinoski Law Offices P.C. in Scranton, we adopt a solutions-oriented approach to property division. As with creating a child custody and visitation plan, reaching terms on property division without litigation allows the parties involved to retain more control over the final outcome. And this includes insurance policy handlings.

Our firm will protect your interests and act as your advocate on all asset division matters as part of a divorce action or any other family law situation. Call (570) 207-4000 or use our contact form to schedule a free initial consultation.

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