11/29/2015
Divorce and Life Insurance Proceeds: Be Aware Of The Law
by Suzanne M. Gradisher, J.D., David R. Kennedy, Esq., and David Redle
Executive Summary
• Divorce and life insurance present issues in financial planning that are complex and often overlooked.
• Based on the current divorce rate and the current amount of life insurance in effect as of 2010, the financial planner will most likely encounter at least one client affected by divorce and life insurance proceeds.
• It is important for financial planners to be aware of their state law on divorce and life insurance proceeds. The reason is twofold: if the client is a beneficiary on a life insurance policy, to make sure the client gets the proceeds, and, if the client is the insured, to make sure the person the insured intends to get the proceeds does, in fact, get the proceeds.
• It is equally important to know what is meant by federal preemption and how it may affect the client’s receipt of life insurance proceeds or the distribution of the proceeds. It is not enough to know what the state law is, but whether or not that state law will be preempted by federal law.
• The authors discuss some of the state statutes and cases dealing with this issue, as well as federal preemption cases, to give financial planners an idea as to why this should be explored with clients.
• The authors also provide planning tips for the financial planner.
• This paper is for informational purposes only. Financial planners should consult a licensed attorney for specific client cases because laws vary by state and other circumstances. Trinity Funeral Funding 201-750-1117
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