How A Second Marriage Can Impact Life Insurance Policies

More second marriages are occurring these days than ever before, and along with the increased number of second marriages is further confusion about where life insurance fits in. How do you name a beneficiary when there are children from a previous marriage? And how do you make sure that both your children and your current spouse will have what they need in the event that you aren’t there to provide it?

License: Royalty Free or iStock source:
License: Royalty Free or iStock source:

Figuring out how to get insurance for your second marriage is not only a lot easier than you may have initially suspected, but it can actually benefit you when you have school-aged children from your first marriage.

How Life Insurance Works In Child Support Scenarios

Life insurance is used in many divorce settlements in order to guarantee child support payments. If more than twenty years remain until the child reaches adult age, a whole life policy may be used. For periods of less than 10 years, term life is usually sufficient.

However, policy changes can result in fierce courtroom battles, especially if there is a disagreement about the importance of coverage between ex-spouses. But having some kind of divorce agreement in place which prohibits changes to the policy can solve this issue.

Named Beneficiaries

If you had a life insurance policy with your ex-spouse, and they were named as a beneficiary, changes will need to be made. Those policy changes can be incredibly difficult if you are already divorced. In some cases, updating a beneficiary from the ex-spouse to a current spouse can be a violation of the divorce decree and as such, will be prohibited. If the beneficiary on an existing policy isn’t able to be changed, then the only solution is to buy additional coverage from plans which can include both your current spouse and other beneficiaries.

Contrary to popular belief, there are no guarantees that your children will receive any money, even if you name your current spouse as a beneficiary. Worse still, naming your children as beneficiaries will leave your spouse with no money upon your death. But there is a solution available, and that is to put property into a trust.

Trust Types

A revocable trust is one common way to make sure that both your spouse and children will be provided for in the event of your demise. You retain sole control over a revocable trust, which means only you can change its terms. Therefore, if you have multiple beneficiaries, the trustee you name can distribute funds or other property among them for you.

The irrevocable trust puts the control into the hands of your trustee. The trust document provides instructions to the trustee about how items and monies should be distributed to beneficiaries.

There are many other trust types which may be better choices when the goal is to take care of a current spouse as well as the children. Speaking with an attorney about your available options may be a good idea if the thought of more than one trust appeals to you.

Timing Is Everything

Ideally, the optimal time to make life insurance arrangements in a  second marriage is before the marriage occurs. Some planning may be needed, especially when there are children involved. And marrying for the second time may also represent a significant change in lifestyle. Important questions will need to be asked, such as whether or not your current spouse is willing to be take on responsibility for the children if something happens to you.

Marrying for a second time can be a dream come true. And although locating the right method of protection for both your current spouse and children can be complicated, understanding your options can mean that you discover the perfect plan that will ensure everyone you love will be able to carry on financially after you are gone.

About the Author: Guest author Adam Foley writes on a variety of topics, particularly related to insurance.  He provided help to consumers who wish to compare life insurance companies by providing useful information on the industry.

Related Post