We Meet Again - Property Settlements and Estates
Property division agreements in divorce proceedings often include provisions relating to life insurance, which can be used, for example, to fund financial obligations remaining at the insured ex-spouse's death.
Life insurance can be deceptively simple. Unless the agreement and the life insurance design are co-ordinated and tailored to accomplish the intended purpose, difficulties can result.
In a recent Washington State Appeals Court opinion, the correct result was reached, at what was had to be an emotional and financial cost. In Sun Life Assurance Company v Lee, the Property Settlement obligated the former husband to pay, at his death, any remaining alimony; and called for a life insurance policy to be made payable (100% apparently) to his ex-wife. The ex-husband violated the terms of the Agreement by naming his daughter as policy beneficiary.
When the ex-husband died, the death benefit exceeded his remaining obligation. Both the ex-wife and the daughter claimed 100% of the death benefit. The Court determined, based on language in the Agreement, that the ex-wife was to receive the balance of the funds due to her, and the daughter the balance of the policy proceeds.
Lesson: The Agreement was clear enough regarding the amount of the obligation due from the ex-husband; but did not dictate a co-ordinated policy structure. It is worthwhile to analyze and document the life insurance purpose and structure at the time the Property Settlement is reached.
This blog is not intended to constitute, and does not constitute, legal advise to anyone or any specific situation. See also our legal notices.