NJSBA Family Law Section

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  • 1.  Life insurance to guarantee alimony entitlement

    Posted 03-02-2015 04:00 PM

    I'm working on a settlement agreement, and I advised client that the adversary was correct -- he would need to have life insurance to guarantee his alimony obligation.

    Client asked why, pointing out the alimony terminates on his death.  Why would she gain some additional benefit on this issue just because they're divorcing?  He never had life insurance during the marriage.

    It's a good point, and "well, because that's how we do it" isn't going to fly.

    I'm assuming there is, in fact, a case or some authority that holds that a payor of alimony can be required to purchase life insurance to guarantee the obligation?

    ...or is this another one of those "quick questions" that actually isn't actually so "quick"?

    There are no pension nor retirement accounts being distributed.

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    David Perry Davis, Esq.
    112 West Franklin Avenue
    Pennington, NJ 08534
    Voice: 609-737-2222
    Fax: 609-737-3222
    http://www.FamilyLawNJ.pro
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  • 2.  RE: Life insurance to guarantee alimony entitlement

    Posted 03-02-2015 04:07 PM
    Dave: Pretty sure it's in statute 2A:34-?

    William W. Goodwin, Esq.
    Gebhardt & Kiefer, P.C.
    1318 Route 31 North
    P.O. Box 4001
    Clinton, NJ 08809
    Phone: (908) 735-5161 x 124
    Fax: (908) 735-9351
    www.gklegal.com<http: www.gklegal.com/="">

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  • 3.  RE: Life insurance to guarantee alimony entitlement

    Posted 03-02-2015 04:08 PM
    2A:34-25. If after the judgment of divorce or dissolution a former spouse shall remarry or a former partner shall enter into a new civil union, permanent and limited duration alimony shall terminate as of the date of remarriage or new civil union except that any arrearages that have accrued prior to the date of remarriage or new civil union shall not be vacated or annulled. A former spouse or former partner in a civil union couple who remarries or enters into a new civil union shall promptly so inform the spouse or partner paying permanent or limited duration alimony as well as the collecting agency, if any.
    The court may order such alimony recipient who fails to comply with the notification provision of this act to pay any reasonable attorney fees and court costs incurred by the recipient's former spouse or partner as a result of such non-compliance. The remarriage or establishment of a new civil union of a former spouse or partner receiving rehabilitative or reimbursement alimony shall not be cause for termination of such alimony by the court unless the court finds that the circumstances upon which the award was based have not occurred or unless the payer spouse or partner demonstrates an agreement or good cause to the contrary. Alimony shall terminate upon the death of the payer spouse or partner, except that any arrearages that have accrued prior to the date of the payer spouse's or partner's death shall not be vacated or annulled.
    Nothing in this act shall be construed to prohibit a court from ordering either spouse or partner to maintain life insurance for the protection of the former spouse, partner, or the children of the marriage or civil union in the event of the payer spouse's or partner's death.

    Amended 1988, c.153, s.7; 1997, c.301; 1999, c.199, s.2; 2006, c.103, s.82.


    Original Message


  • 4.  RE: Life insurance to guarantee alimony entitlement

    Posted 03-02-2015 04:41 PM
    Dave,



    I think the fair answer to your client's question is that life insurance is a backstop for alimony, to cover the financial loss represented by the obligor's death. The dependent spouse has an insurable interest in the life/death of the supporting spouse.



    Child support stops on a party's death, too, but most payors understand that financial obligations for unemancipated children live past either party's demise.



    The trial court has the power to order life insurance coverage for children and/or dependent spouses incident to the divorce, both pendente lite and at final judgment. A negotiated agreement usually covers those elements as well since, failing agreement, the trial court in many cases will order that relief.



    Case law says the surviving spouse is not entitled to a windfall, only to that amount of life insurance that reasonably covers the net loss. So step-downs in life insurance coverage for alimony – and child support (including college costs) – are negotiable or court order-able.



    Technically, although most obligors don't claim it, payment of life insurance premiums to backstop alimony can be tax deductible to the payor and taxable to the payee, because the premium payments are required by agreement or order of the court and are themselves in the nature of spousal support. Life insurance for child support does not have the same tax effect, as you would imagine.



    Hanan


    Original Message