Can my ex-spouse cash in a life insurance policy that she owns before our children, the beneficiaries, are legally adults?
My divorce decree states that I have to maintain a life insurance policy in the amount of $250,000. My ex-wife will be the owner and my children (ages 15 and 13 years old) will be the sole beneficiaries. No other beneficiaries can be listed. Can my wife cash in the policy for her use, or does she have to wait for the kids to be legally adults?
Ultimately this will likely boil down to what the divorce decree states. If she is the owner- the insurance company could accept instructions from her to cash in the policy. This would only apply if you were buying a cash value life insurance policy.
If on the other hand you were buying Term Life Insurance. -this is likely the more cost effective way to go- and she is the owner - she could potentially cancel the policy. But there is no reason for her to do this if you are the one paying the premiums.
You questions states no other beneficiaries can be listed- but you will likely be able to list your kids as "contingent beneficiaries" unless the divorse decree specifically excludes this.
This may end up being more of a divorce attorney question than FA question.
Best of Luck,
The owner has control of the policy. That means that coverage can be terminated if she wants to. This raises a few questions:
When you say “cash in,” do you mean for cash that is inside the policy? Why are you using a permanent, cash value policy to meet the terms of the divorce decree? Isn’t the need for coverage temporary, and if so, why aren't you using term insurance, which would not accumulate cash?
Why aren't you using a trust so that you can assert the control you are looking for? If you set up the trust correctly, you wouldn't have to worry about anybody depriving your children of their benefit.
Who is guiding you in this process? You need to have a divorce lawyer who understands the use of life insurance.