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Splitting Issues Before Divorce is Final is Unwise
Jan L. Warner & Jan Collins

Question: After 27 years and two children now out of college, my husband and I are divorcing because of his philandering. While I was lucky to find a job at age 50 that pays me $24,000 annually and gives me group health insurance, I still donít have enough money to take care of my bills. My husband, however, will pay me alimony. He is 53 and plans to marry a 29-year-old as soon as our divorce is final. We have agreed on most of the details, except he won't agree to make me the beneficiary of one of two $100,000 life insurance policies so that I wonít be left destitute should he die while paying me alimony. If he dies (he had heart bypass surgery last year), my alimony will stop and the bimbo will get it all. My husband wants us to get divorced and then get the insurance straight. I don't think this is fair.

Answer: We donít either. Under the circumstances you describe and based on your life expectancy, which is 30-plus years, we agree that your becoming beneficiary of at least one of those policies Ė and maybe both Ė is essential. Think about it: If your husband is required to pay you $1,000 per month as alimony, and you live to your life expectancy, he would have paid you $360,000!

Generally speaking Ė and depending on the law of your state of residence, courts have the authority to require spouses who pay alimony to provide security that will protect the receiving spouse should the paying spouse die first. Security can be in the form of 1) putting up money or property or 2) purchasing or continuing life insurance. In deciding this issue, the court will look at such criteria as the type of coverage, the premium cost, whether the paying spouse is insurable, what would happen to the receiving spouse if the paying spouse died, and other factors the court deems relevant.

Under no circumstances should you agree to give him his freedom until he agrees to give you the insurance. His risk, we believe, is equal to yours. If he is anxious to get married and doesn't want to spend time and money in the courts, there should be room for compromise, such as: 1) Making you the beneficiary of one policy, with him paying the premium that could be deductible to him and taxable to you as a part of your alimony payments, or 2) Transferring one policy to you so that you will own it, and you can pay the premiums yourself. If your husband is healthy, you might be able to purchase a policy on his life; he would then increase the alimony payments to cover the premium payments.

In any case, make sure you have full access to all insurance information to ensure that your husband pays the premiums in a timely fashion and does not change the beneficiary. In fact, you should be named as the irrevocable beneficiary so long as you are entitled to receive alimony. Make sure that you and your lawyer understand the terms of the policies, and watch out for potential hidden income tax liability that may arise if the policy is transferred to you and your husband pays the premiums.

SoloFact: We donít believe that getting divorced while financial matters are up in the air is a good idea. Called "bifurcation," divorce is separated from the financial aspects of the case when both husband and wife agree. Although many couples want to "get on with their lives," bifurcation can be dangerous if one former spouse remarries or dies before the economic issues have been resolved. This is especially true when it comes to survivor beneficiary rights in pensions, life insurance, and other such important issues.



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Suggested Reading:
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FS-The Dangers of Family Loans
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