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Separation Agreements, Divorce Settlements ,Life Insurance and Irrevocable Beneficiaries

It is a common requirement today to have a lawyer request that life insurance be put in place to back up support payments or deferred cash settlement payments when separation agreements are drawn up and/or divorce settlements are made.

The logic behind this of course is very simple; if the person making support payments or owes an ex spouse money for property settlements, etc, there is the age old problem of how that gets backed up, if the person responsible for the support, dies prematurely. Dependents are still requiring the income that has been committed for them and ex spouses still require the equity settlement. Most don't want to get involved with a deceaseds' estate, especially an ex!

People will often make the mistake of committing to put the life insurance in place to satisfy the agreement without even considering that they may in fact be unable to get the insurance for medical or other reasons. When negotiating a settlement and the discussion comes up, it should always be agreed,"subject to approval and issue by a life insurance company.". Contrary to popular terms about "buying" life insurance, you actually "apply" and must be approved.

When negotiating on this type of agreement make sure you have the "subject to" part in there and get your application into the insurance company as soon as possible, do not leave it to the last minute.

As well, if you are the "beneficiary" of the policy, request to be made an "irrevocable beneficiary". This is really the best way to police that the policy stays in force and the beneficiary is not changed. By being allocated as an irrevocable beneficiary you are automatically brought into the picture by the insurance company if there are any proposed changes to the policy or any payment problems keeping it in force. There have been many ex spouses who have found out after the fact that a policy may have been in force at the outset of an agreement only to find that it has been changed or cancelled after the fact.