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What Happens To Your Life Insurance When You Divorce?


Dealing with a life insurance policy can be tricky enough on its own. But, when this life insurance plays a role in one’s divorce proceedings, things can become far more complicated than they need to be. 

What Is Life Insurance? 

The definition of “life insurance” is as follows: a contract between an individual and an insurance company that specifies that, in the event of that individual’s death, a certain amount of money will be paid to the individual designed within the life insurance policy.

Many people possess a life insurance policy. The benefits of doing so are as follows:

  • Being able to ensure that one’s family members are taken care of, on a financial level.
  • Being able to prevent significant financial problems, in the event of an accidental death.
  • Being able to ensure that any remaining medical expenses are taken care of.
  • Being able to ensure that the cost of a funeral is taken care of.
  • Being able to ensure that long-term debts can be, and will be, paid off.

Each one of these benefits is very, very useful. This is especially true for those who are married and, as such, are supporting one another. And, it is even more true for those who are married and share children with their spouse.

What Happens To Your Life Insurance When You Divorce? 

The majority of life insurance policies are tied to one person’s work and, as such, considered separate assets. For this reason, they are not considered marital property and, as such, not subject to Maryland’s division-of-property laws.

But, with that being said, this is not true of every single life insurance policy. Rather, some life insurance policies exist beyond the confines of a job and, in turn, follow the person who holds the policy from one job to another.

A permanent life insurance policy, of the sort outlined above, may be considered a joint asset and marital property, which means that they are subject to Maryland’s division-of-property laws. 

What Should You Do With Your Life Insurance Policy After A Divorce? 

A life insurance policy can be dealt with in many ways, both during and after the divorce process. Some of the ways in which a life insurance policy can be dealt with are as follows:

  • Cashing out the policies – if the policy is a cash-value policy – and, then, dividing these funds.
  • Setting up a trust and, then, putting the trust as the beneficiary of the life insurance policy.
  • Trade the cash value of the policy for another marital property.
  • List one’s children – and, perhaps, the former spouse – as beneficiaries of the life insurance policy.

Every single one of the options is valid and, in many cases, quite useful. But, with that being said, some of these options are better for certain individuals, in specific situations, than others.

No matter what, though, one should go over these options and consider whether or not they are aligned with both spouses and their wishes. 

Do You Need Legal Help? 

The divorce process is confusing, complex, and stressful. But, by working with a trusted Bel Air divorce lawyer, the process can, and will, become easier and far more pleasant.

Our lawyers, at Schlaich & Thompson, possess more than 60 years of combined legal experience in family law.

If you need legal help, regarding any facet of a divorce, please contact us today and we will set up an initial consultation.




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