Dear Quentin,
My husband and I are in our second marriage. We each have children from previous marriages. His first wife’s divorce decree states that he must keep a $350,000 life insurance policy for his children. However, under the current policy, I am the sole beneficiary. What would happen if he died and I received the payout from the life insurance policy?
Am I legally obligated to give the money to his children because of what his divorce decree says? There is currently no written will that states anything for his children. I don’t want to be left in a legal limbo. Should I talk to my husband about this and ask him to name his children as beneficiaries of the policy, as per his divorce decree?
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Wife and mother-in-law
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Dear mother-in-law,
You wouldn’t be the first second wife to be caught up in a battle between a life insurance policy and a divorce decree.
It is wise and mature to think ahead and want to deal with this issue now, rather than putting it off until something happens to your husband and then seeing how it all plays out. This would not only create legal problems for you and his first wife, but also unnecessary stress for the entire blended family at an extremely difficult time. I applaud you for wanting to do the right thing and ensure that nothing bad happens. It is the decent thing to do. The Supreme Court has ruled on such cases as well.
You can ask your husband to remove your name from the insurance policy and name his children as beneficiaries, according to his divorce decree. “If you are ordered to pay spousal and/or child support as part of your divorce, the judge may require you to purchase life insurance to protect those payments,” according to Charles R. Ullman & Associates, attorneys in Raleigh, North Carolina. “Once your children reach the age of majority, you can file a motion to modify the divorce agreement.”
“Some life insurance policies are set up with irrevocable beneficiaries, which cannot be changed by the policyholder alone,” the law firm adds. “Unless a former spouse agrees to change the policy, as an irrevocable beneficiary, he or she would be entitled to a payout upon your death, even after a divorce.” If there were no children involved and your husband had not been ordered to maintain the life insurance policy as part of his alimony, he could in good conscience list your name on the policy as a beneficiary, the firm adds.
Related: “I’m torn”: I have two sons, one a hard worker with children and the other a “carefree” actor. Should I leave more money to the “family man” in my will?
There are reservations
This can all be debatable depending on the type of insurance policy he has. A term life insurance policy lasts between 10 and 30 years, and if your husband lived longer, the policy would expire and the beneficiaries would not receive any money. A whole life insurance policy, on the other hand, has a cash value (the amount you can withdraw during your lifetime) that costs more than a term life insurance policy. Once a whole life insurance policy has accumulated a significant cash value, the insured person can cash it out or borrow against the face value. And, of course, if the insured person dies, the face value would go to the legal beneficiary.
Beware: If your husband’s divorce decree is unclear about the beneficiary of his life insurance policy, the outcome may depend on your state’s laws. A divorce decree can sometimes void a life insurance policy, but the circumstances are fairly limited: “If the policyholder was married in a community property state and divorced, the former spouse may be entitled to a portion of the death benefit, regardless of the beneficiary named,” according to Boonswang Law in Philadelphia.
It’s not clear that your husband acted to change the beneficiary of his life insurance policy knowing that doing so would violate his prior divorce decree. About half of U.S. states — including Florida, Pennsylvania, New Jersey, New York, Texas, Massachusetts and Colorado — have some form of divorce revocation law that automatically removes a former spouse as a beneficiary of a life insurance policy after a divorce, the law firm says. California law, by contrast, excludes life insurance policies from automatic divorce revocation laws.
In a similar but not identical case, the Supreme Court ruled in favor of the ex-wife. In Hillman v. Maretta, the Supreme Court ruled in favor of the ex-wife of a 66-year-old man, who had been named the beneficiary of a life insurance policy worth more than $124,000, rather than his widow. The second wife claimed she could claim the policy under Virginia law, which revokes the beneficiary of a divorced spouse in favor of the widow or widower. The Supreme Court overturned that decision, and the ex-wife was awarded the money.
Ask your husband to correct this inconsistency and become his own Supreme Court justice.
Other columns by Quentin Fottrell:
“I Don’t Want Anyone Telling Me What to Do”: My Second Husband Wants to Put Our $750,000 House Into a Trust for His Kids. Is He Allowed to?
‘I was devastated by his infidelity’: I’m still on the title to my ex-wife’s house, but our divorce decree says she gets the property. Am I sitting on a golden goose?
My soon-to-be ex-husband put his money into a trust before we got married and used it to buy properties. Am I entitled to any of these benefits?
