The Need for Life Insurance in Custody and Child Support Cases

Oftentimes parents will ask, “Well why do I have to maintain life insurance if I’m going through a divorce and we have children? Why do I need life insurance?” There are two ways I have seen that a court will enter orders for a parent or parents to keep life insurance in effect.

One is obviously where children are involved and the parents are both providing support for the child or children. A life insurance policy will protect the children’s interest if the children lose the love, affection and economic support of a parent if that parent dies before the children turn 19 years of age or older.

The other situation is mandated by statute and spousal maintenance cases where a parent or a party has been ordered to pay spousal support to the other party, commonly referred to as alimony. Colorado revised Statute 14-10-114 says when there is a spousal maintenance obligation the Court shall enter an order that the party who is paying spousal maintenance also be ordered to carry a life insurance policy on his or her life so that in the event that that person dies before the spousal maintenance obligation is paid in full there will be sufficient life insurance, called collateral, to go to the party receiving spousal maintenance.

To determine the amount of life insurance that’s going to be necessary in those kinds of cases I oftentimes consult with a forensic CPA who is instrumental in helping me and the parties decide what the appropriate amount of life insurance is. But the answer to that question is that the court certainly will order life insurance in those cases involving spousal maintenance and you should be aware that when you are making these kinds of decisions in your case.

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