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Life insurance division may raise questions in divorce

The division of life insurance is one area divorcing couples in Florida may not consider but which can lead to serious problems between partners. Normally, property division includes real estate, bank accounts and retirement funds, but life insurance can also be considered part of the marital estate. If a partner owns a valuable life insurance policy, it can be difficult to liquidate it in order to give half to the other spouse.

Life insurance typically has low cash value but high value in terms of eventual proceeds. Because life insurance is designed to pay out on the death of the owner, few couples have access to the cash represented by the payout when they divorce. However, if the owner intends to keep the policy, the other spouse may claim that these proceeds should be considered part of the marital estate and that he or she should be reimbursed accordingly.

Once a divorce is final, partners have no control over life insurance policies they do not own. Therefore, the value of a policy must be considered prior to the divorce. Term policies usually have very low cash value and it may not be beneficial to surrender them in order to access a relatively small amount of money. On the other hand, once a divorce settlement has been made, the owner may transfer the beneficiary of a policy, leaving the former spouse without any proceeds in case of the death of the owner.

A family law attorney may advise clients in the details of property settlement. A fair and equitable distribution of marital property is the goal of any divorce settlement agreement, and this may include the division of the value of life insurance policies.

Source: Fox Business, "Don't I Get Half of My Ex's Life Insurance Policy? Read more: http://www.foxbusiness.com/personal-finance/2013/05/06/dont-get-half-my-ex-life-insurance-policy/#ixzz2TDl1PGJV", Jack Hungelmann, May 06, 2013