People in the divorce process commonly overlook how important life insurance is in the process. Most people think “Well, I’m not going to pay for a policy on my ex!” Setting anger aside, you should consider it if you’re depending on their support or if they have a special role in the family.
There are several different things to consider when factoring life insurance into the divorce. First, you should always bring it up with your attorney while you’re still in the process. Your attorney can put terms in to the property settlement agreement saying that your spouse needs to have a life insurance policy with you as the beneficiary to protect the spousal support or child support you’re receiving. Why? Because if you’re depending on that as income and your spouse dies, that income will stop. Unfortunately, no one else will pay that income to you. If you already have a life insurance policy, you can elect to keep that policy with you as the beneficiary. Just make sure that the death benefit is enough to cover your support. For example, if you’re receiving $2,000 a month (AKA $24,000 a year) and you’re going to be receiving that for 10 years, then you should consider having a policy with a death benefit of at least $240,000 or whatever portion you feel comfortable having covered. Also make sure the policy will last for the full 10 years. If it was a 20 year policy and you’re already in year 15 but you’re getting support for 10 years, then you’re truly only protected for 5 out of the 10 years and should consider getting a new policy to cover the difference. What if you’re not getting support though? Why else would you consider getting a policy on your soon-to-be ex? They may be a supporting factor of your family. Perhaps that person is a stay-at-home parent or takes care of the children’s needs- i.e. transporting to/from hobbies, cooking dinner, doing laundry, cleaning the house, etc. If that’s their primary role and they passed away, you would have to pick up those duties. But what if you’re not able to because of work or other obligations? Then you would have to hire someone to do them, which costs money. If you have a death benefit paid to you from a life insurance policy, that could make that transition a little easier. This article is not saying that life insurance is right for everyone in every situation. However, it is saying that it should be discussed with your financial advisor and your attorney to see if it’s right for you. For questions or information on our organization and upcoming workshops, please call (703) 868-0304 or email [email protected].
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Pensions always seem to be one of those unknown topics with spouses that are divorcing. The spouse that owns the pension knows that it’s theirs, but they aren’t sure how much their spouse is entitled to. The other spouse (typically) knows that it’s there as well but also doesn’t know what they’re entitled to. Many divorcing couples think that they don’t need to deal with the pension until they’re nearing retirement but guess what? They’re wrong! If you are five, ten, or even twenty years away from retirement, that pension still needs to be brought up during the divorce process. If it’s not, you run the risk of losing that portion of your retirement without even realizing it. When you divide retirement assets like 401(k)’s, Individual Retirement Accounts (“IRA’s”), etc, typically you use a qualified domestic relations order (“QDRO”) to move money from one retirement account to another without incurring taxes. However, for military and federal pension plans, attorney’s use specific language in a court order. (I’m not an attorney so please consult one for more information on that topic). When dividing a pension, you can divide it by a specific dollar amount or by a percentage. You have the option to add the cost of living adjustment (“COLA”) rider at an additional cost, which means there is an increase in your income every year to keep up with the rising cost of inflation. Keep in mind that this starts when the income payments start, which happens when the pension owner retires and starts taking an income from the pension. At this point you may be wondering- what happens if your ex-spouse dies before you? The pension can either stop completely, or you can elect to have the payments continue. If you elect to continue the pension income, that comes at an additional cost as well (AKA a smaller income.) For any additional option you add to the pension, you want to determine if the cost is worth the benefit that you will receive or not before making a final decision. If you and your spouse can’t agree to how you want to split the pension and/or which add-ons you do or do not want, the court can decide for you. (That is not usually the route most people prefer). Additionally, you can agree not to take a portion of the pension in exchange for other marital assets that may have more personal value to you, more liquidity, etc. Note that this is based on today’s laws so before you make any decisions, be sure to consult with, and weigh the pros and cons with, an attorney and with a financial advisor to ensure you’re making the best choices for your personal situation as you’re moving through this difficult transition. For questions or information on our organization and upcoming workshops, please call (703) 868-0304 or email [email protected]. Everyone plans to retire. Most would like to retire sooner rather than later but unfortunately that doesn’t always happen, especially when divorce comes into the picture. We all have a picture of retirement in our heads. For some it’s traveling around the world, maybe visiting family and enjoying your spouse’s company. You’ve been saving for years and years; the time is getting closer each and every day. Then the divorce happens. Money gets dumped into the divorce and your assets are being split. How will you live on one income? Even more so, how will you retire on one income? Social security plays a big role for many individuals when planning for retirement but there are benefits for divorced spouses that a lot of people aren’t aware. I’ve taken the liberty of listing a few below.
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AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
November 2017
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