Life Insurance Beneficiary After Divorce

The American Psychological Association (APA) estimates that as many as 50 percent of U.S. couples will eventually separate. Although ending a marriage is far from unusual, it is still a difficult, often stressful process. Before couples can finalize their separation, there are many complicated issues that must be resolved. 

Life insurance is a quintessential example of an issue that, while probably not at the forefront of your mind, should be addressed in a divorce settlement. Here, our Union County divorce lawyers provide the most important things you should know about life insurance and divorce in North Carolina. 

Divorce Does Not Automatically Change a Life Insurance Beneficiary

Divorce changes a lot of things. However, one thing it does not change is your life insurance beneficiary—at least not automatically. This is in direct contrast with some other common estate planning issues. As an example, once a divorce is finalized, a former partner will likely lose their status as a primary beneficiary. It does not work that way with life insurance. A life insurance contract will survive a divorce—meaning your life insurance beneficiary will remain the same. That is unless you take proactive steps to make changes.  

Update Life Insurance—and Your Estate Plan—After a Divorce 

Although you may not always need to update your will after a divorce, it is best practice to review your estate plan during the separation process to ensure that it still properly protects your rights and interests. Some estate planning documents may need to be revised in light of a divorce. At this time, one may want to change their life insurance policy to remove their former spouse as a beneficiary. As a general rule, the most straightforward way to make changes to your life insurance policy is to do so is in your divorce agreement. 

Life Insurance May Be Considered a Marital Asset (Cash Value) 

Another reason to deal with life insurance before you finalize your divorce is that your policy may be a marital asset. Under North Carolina law, term life insurance policies—coverage that carries no cash value—will generally be treated as separate property. As such, the spouse who holds a term life insurance policy can keep or remove their ex as a beneficiary. 

In contrast, whole life insurance—which may have an actual cash surrender value—is considered to be a marital asset. As it is joint property, a whole life insurance policy must be addressed during a divorce settlement. These life insurance policies are subject to equitable distribution under North Carolina law.  

Get Help From a North Carolina Family Law Attorneys Today

At Perry, Bundy, Plyler & Long, LLP, our top-rated North Carolina family lawyers are knowledgeable, experienced advocates for our clients. If you have questions about life insurance and your divorce, we are here to help. For a confidential consultation, please contact our law firm now. From our office in Monroe, we represent clients throughout Union County, including in Weddington, Indian Trail. Stallings, Mint Hill, Lake Park, Wesley Chapel, and Waxhaw. 

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