More often than not, spouses name their partner as the beneficiary of their life insurance policy, so that in the unfortunate event of their untimely demise, they would have the means to take care of their family. If a couple decides to go their separate ways, the obligation to continue the payment on this policy may continue. As such, you might raise the question of how life insurance will be divided during a New Jersey divorce. Please continue reading to learn when life insurance is subject to equitable distribution and why connecting with our trusted Monmouth County Division of Assets Attorneys is in your best interest.
How is Life Insurance Divided in a NJ Divorce?
New Jersey is an equitable distribution state, which means in the event of a divorce, marital property is not automatically split 50-50. Rather, it is split in a fair manner, taking each spouse’s contributions to the marriage into account. Whether or not your life insurance policy is subject to equitable distribution comes down to the type of policy it is.
If you have “Whole Life” insurance, this policy is subject to equitable distribution in a divorce because it accumulates a cash value over time, which makes it considered a marital asset. If you have “Term Life” insurance, this policy doesn’t have a cash value component. However, if both spouses contributed to the policy during the marriage, they would be entitled to a share of its value upon divorce. It is important to note that in many cases, the court will require the policyholder to maintain the insurance policy for the benefit of the other spouse or any shared children.
Do I Need to Update My Beneficiaries?
Unless you have received orders from the court instructing you otherwise, you don’t need to change the beneficiaries on your policy. If the court doesn’t make any such ruling, you may still consider updating the beneficiaries of your policy. Keep in mind that most policies don’t automatically update to remove an ex-spouse as a beneficiary. If you fail to change the beneficiaries your ex-spouse will receive the payout upon your passing, regardless of a divorce. This is because the purpose of the policy is to ensure those who are financially dependent on you are taken care of in the event of your untimely death.
If the final divorce decree doesn’t include your life insurance policy, you are free to modify the policy according to your wishes, which may even include canceling it. However, without a life insurance policy, your ex-spouse can sue your estate for alimony or child support payments that are awarded in the divorce should you pass away. This can be an incredibly complex process, which is why the courts often require the policyholder to maintain the policy.
At Paone Zaleski & Murphy, we are prepared to fight to help you receive the best possible outcome during your divorce. Connect with us today to learn how we can assist you in these difficult times.
