How Life Insurance May Factor into Your New Jersey Divorce

Among the many issues that must be addressed during your divorce, critical decisions must be made with regard to insurance. Obviously, insurance can take many forms, encompassing homeowner’s insurance, auto insurance, health insurance, and others that protect you and those you love in the event of an accident, injury, illness, or other potential challenge. When dealing with the many facets of divorce process, life insurance often becomes an oversight, as most divorcing spouses do not regularly confront the idea of their own mortality, or that of their former partner.

If couples do contribute to a life insurance policy during the marriage, the logical question becomes: what to do with the policy upon divorce? Although it may seem unnecessary to maintain the policy, there is a key service that a life insurance policy may provide with regard to alimony and child support. Understanding the way in which a life insurance policy may protect you and your children will allow you to implement an arrangement that best positions you for the future.

Life insurance serves a purpose for any family, protecting spouses and children in the tragic event of one spouse’s untimely departure. This protective mechanism can also serve divorcing families, as it can provide long-term financial support to replace alimony and/or child support if the providing party passes away. Consider this: if you are the recipient of alimony and/or child support and your former spouse dies, what mechanism will be in place to compensate for their lost financial contributions? A life insurance policy can provide the support that you need to maintain your life and to ward off catastrophic financial hardship.

A recent unpublished opinion from New Jersey Superior Court Judge Lawrence Jones, in the case of Ashmont v. Ashmont, addresses the issue of life insurance in divorce, providing valuable guidance with regard to decisions involving life insurance. The background of the Ashmont case is as follows: the Ashmonts divorced in 2007, in the Marital Settlement Agreement, the wife was awarded primary residential child custody, as well as permanent alimony and child support. Additionally, the husband consented to maintain a life insurance policy that would serve to replace these forms of financial support in the event of his untimely death.

After several years during which the husband failed to comply with court-ordered maintenance of the life insurance policy, the wife filed a motion seeking enforcement of the life insurance provisions contained in the Marital Settlement Agreement. She also sought financial sanctions to compensate for the way in which her and her children’s financial security was compromised during the period of delinquency. After the motion was filed, the husband did bring himself into compliance with the agreement. In resolving the case, Judge Jones issued a compelling opinion addressing a variety of issues surrounding life insurance policies, alimony, and child support during and after divorce. His opinion was composed of four key components, outlined as follows:

• In divorce litigation, when a supporting party has an ongoing alimony and/or child support obligation, a court may order such party to carry life insurance as an important method of financially protecting a dependent party, or child as applicable, in the event of the supporting party’s premature death;
• If a supporting party has an obligation to carry life insurance, the court may direct that the supported spouse or other parent be named as the owner of the policy, if permitted by the insurance company. This option is particularly relevant when the supporting spouse has a history of failing to adhere to his or her court-ordered life insurance obligations.
• When a party willfully breaches a court-ordered obligation to carry life insurance, the court may issue multiple forms of relief under Rule 5:7-3, including but not limited to ongoing financial sanctions, until such time as the defaulting party complies with the obligation.
• When a party violates a court order, but ultimately complies prior to the conclusion of enforcement litigation, such compliance does not completely erase or negate the violation. Nonetheless, remedial and corrective conduct is equitably relevant on the issue of mitigating sanctions and penalties which might otherwise be imposed under the circumstances.

This case exemplifies the importance of life insurance, an often disregarded component of divorce proceedings. The two primary ways in which this manifests is: the utter lack of provisions regarding life insurance in the Final Divorce Decree; and the failure to maintain a court-ordered life insurance policy after the divorce’s conclusion. In either scenario, the recipient of alimony and/or child support is left in a vulnerable position.

To avoid the potentially devastating consequences of an oversight or post-divorce delinquency regarding a life insurance policy, it is highly advisable to consult with a knowledgeable family law attorney. For additional information and a cost-free consultation, contact the Morris County law offices of  Townsend, Tomaio & Newmark at 973-840-8970. Our experienced New Jersey divorce and family lawyers can answer your questions, address your concerns, and ensure that you make informed decisions moving forward.