Insurance

Protecting kids when life insurance lapses

Q: I just received a letter from our life insurance carrier that my ex-husband’s policy lapsed.  When we got divorced a few years ago we each agreed to maintain insurance until our three children finish college.  He has to maintain $1 million because he also makes double what I make and pays child support.  None of them have finished college and two are still in high school.  I asked him to try to get it reinstated and he said he no longer qualifies because his blood pressure is so high.  I think his blood pressure is high because he drinks so much.

I prefer not to take him back to court but I am truly concerned about his lifestyle and whether our kids will be able to go to college if something happens to him.  What is the best way to ensure our kids are OK if he drinks himself into an early grave before they finish college?

A: If you want to avoid court, you can look into other security if he has sufficient assets.  Does he have retirement?  A house?  Both?  Depending on the value of his assets, you can propose he use a different asset as security.  Start with retirement because that is the easiest alternative security given the beneficial designation.  Ask him to name you as the beneficiary of his retirement until your children graduate in lieu of replacing the life insurance policy.  The problem becomes – does he have a million in retirement?

If not, look at the equity in his house as security.  A real estate lawyer can draft a mortgage where he grants you an interest in the equity in his house for so long as he has an obligation to maintain security for support.  Make sure you record the mortgage so the world has notice of your interest and he cannot deplete the equity by getting another mortgage which trumps your interest.  Then, when your youngest graduates, you can discharge the mortgage and free up his equity.

These options would require the two of you to prepare a modification agreement which you will file with the probate and family court to memorialize the change you have made.  This would prevent you from filing a complaint for contempt about his lack of life insurance and give you rights of enforcement with regard to his retirement / equity.

If he refuses to agree, you should file a complaint for contempt.  He might say he cannot be found in contempt because the life insurance company will not reinstate his policy.  The problem is by letting the policy lapse, he violated the court order so he is in contempt.  So, he should be ordered to pay your legal fees and ordered to provide alternative security.  If the judge orders the mortgage alternative, be sure to ask that he be ordered to pay the real estate lawyer’s fees too.

Email questions to whickey@brickjones.com.


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