Colorado couples who are contemplating divorce often have many questions about property division and asset distribution. However, few of those thinking about a divorce consider one important part of the marital assets: life insurance policies. Dividing insurance policies can be difficult and time-consuming and may end up hurting both parties financially if the division is not done carefully.
Life insurance is purchased so that cash may be obtained in the future. Because of this, it is different from a home or other investments. There is usually no current value in a life insurance policy because it is designed to pay out on the death of the owner. Term policies in particular have very little cash value until the end of the policy, and even then the amount may be so small as to scarcely warrant consideration in property division. However, the proceeds of a life insurance policy may be very large and a divorcing spouse may be concerned that the owner of the policy will change the beneficiary and the proceeds will go elsewhere.
In such a situation, it may be difficult to know what to do. One way to solve the problem is to surrender the policy and split the cash value. However, this may hurt both parties as no one gets access to the proceeds and the cash value may be very small. On the other hand, if one partner wants to keep a particularly valuable policy, financial consideration may be made to the other spouse.
A family law attorney may be able to assist an individual in answering financial division questions. The goal of any divorce is to fairly and equitably divide the assets so that both partners benefit if possible.
Source: Fox Business, “Don’t I Get Half of My Ex’s Life Insurance Policy?”, Jack Hungelmann, May 06, 2013
