Maintaining Life Insurance After Divorce

Courts will frequently order a parent to maintain a life insurance policy naming the children as beneficiaries. This order is made to ensure that there will be sufficient funds to support the children should the parent die while the children are minors.

How the amount of insurance is determined
 
The amount of child support being paid must bear a relationship to the amount of the death benefit. In establishing the amount of the death benefit, one must remember that child support is subject to change and a death benefit which appears excessive at the time the divorce was negotiated may not seem excessive in the future if viewed in the context of a future child support order. Moreover, one has to look to the level of inflation which, though low for the last ten years, has in recent memory been quite high. An amount which seems high today may not be high ten years from now.

Consider establishing a trust for college expenses
 
Life insurance proceeds may be used by the beneficiary in any way he or she sees fit. You may wish to establish a trust to receive the life insurance proceeds, which can be used by your children for college expenses.

Social Security benefits

The Social Security Administration provides survivor benefits. As a person works and pays into Social Security, he or she earns credit toward these benefits. The unmarried children of a deceased parent receive monthly benefits so long as the children are under 18 (or up to age 19 if they are attending secondary school full time.) The amount of the benefits depends upon the lifetime earnings of the person. Knowing that figure might be helpful in calculating a reasonable amount of insurance after divorce. You can contact the Social Security Administration to find out. Its web address is www.ssa.gov or call 1-800-772-1213 for more information.