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Life Insurance: Securing Child Support Just In Case

You went through a lengthy mediation or trial, you resolved timesharing and child custody, you crunched the numbers, and came up with the child support obligation that needs to be paid every month.

No more issues with child support until your youngest is 18 , right?

Not exactly.

What happens if you pass away?

What happens if the other parent passes away?

While one party is ultimately paying some child support, child support law takes into account that both parents are contributing to the financial needs of a child.

But what happens if your spouse passes away?  You will become a truly single parent.  If your soon to be former spouse passes away would you be able to financially take care of your child[ren] on your own?  Even if you could, you will have your child 100% of the time, a commitment that will increases the costs paid on behalf of the child while almost certainly impacting your ability to generate the income you make now.

So what is the solution?

Adding a clause to the agreement, or having the Judge order the payor spouse to maintain a life insurance policy to protect the award of child support.  Florida Statute § 61.30 (c) even gives the Court’s authority to order the payor to do this.

However, before a Court can Order the payor to maintain a life insurance policy it must consider the need for such insurance, the cost and availability of insurance, and the financial impact on the person paying support.  Plichta v. Plichta, 899 So.2d 1283, 1287 (2nd DCA 2005).

How Much Life Insurance Do You Need to Get?

If you are paying child support and are contemplating getting an insurance policy to make sure your children are taken care of in the event of your death then the amount you get is up to you.  However, if this is something to be ordered by the Court you should know that the Court cannot order you to maintain a life insurance policy for more than the child support obligation.  Beharry v. Drake, 52 So.3d 790 (5th DCA 2010).

So you would need to calculate how much the child support obligation is going to be for the total term (including any decreases if there are multiple children.)  The total term is going to be until every child reaches age of 18, or graduates high school, depending on your agreement.  This will give you the total obligation, and then it will give you an amount to get for the life insurance.

Since by the very nature of it the total child support obligation decreases every year, so would the amount of insurance required every year!

How to Designate a Beneficiary

If you are the child support paying spouse there is a good chance you do not want to get the life insurance policy because you are thinking to yourself:  “my ex is just going to spend all the money from the life insurance on herself.”  So how do you get around that?

Naming Your Child as The Beneficiary

Can you name your minor child as the beneficiary?  You can. However, if you list your children as the beneficiary then the insurance company will not pay the proceeds directly to the minor. The probate court would step in and appoint an adult to handle the money until the child reaches the age of majority. This would be a costly process, and the court would most likely designate the remaining parent.  Whatever money not spent when the child turns 18 would be turned over to him/her.

Another was to handle it is to designate a responsible adult as the custodian of the policy, and designate it “as being for the benefit of the children.”  Layeni v. Layeni, 843 So.2d 295, 300 (5th DCA 2003).  Since your soon to be ex-spouse has no interest in the child support except as the receiver of the payments she does not need to be listed as the beneficiary.  You can name whoever you wish to be a custodian for the life insurance policy.  The custodian would receive the funds and would be expected to use them for the child’s benefit.

The negative is that you cannot set up conditions of how you want the money disbursed.  In other words, the custodian will have everything to say about how the money is distributed.

The Preferred Method of Designating a Beneficiary in a Child Support Case

The best way to designate the beneficiary for a life insurance policy would be to name a trust as the beneficiary of the life insurance policy. The life insurance policy can be paid into the trust, and the designated trustee could handle the money until the minor child reaches adult age.  This way you can designate a trustee who you “trust” to manage the money to pay for the needs and expenses of the minor child.

If you set up the trust you can also set conditions for how the money is dispersed, and how it can be used.

So in one common example, the trust requires the trustee to pay out the monthly child support amount until such time as the minor child turns 18.  At that point, perhaps 1/2 of the remaining funds are paid to the minor child, with the balance of the funds being paid out when the child graduates from college.  You can be creative with the trust to make sure that the children are the beneficiaries of the money and not the ex-spouse.

This option provides you with the most control after you are deceased, however, it is the most complicated and you should get an attorney to handle the documents if this is the option you choose.

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