A couple's financial planning might include life insurance as a way to protect one spouse in the event of the other spouse's death. After divorce, each ex-spouse, especially one who receives alimony, should know whether a life insurance policy still applies. Under specified circumstances, a divorced spouse may remain as the designated beneficiary on an ex-spouse's life insurance policy. In Texas, for this to be the case, the law requires legal action, such as a provision in the divorce decree or a re-designation of the beneficiary.
Texas Family Code
The state laws regarding life insurance after a divorce come from the Texas Family Code. Section 9.301 of the Family Code discusses the legal effects of divorce on a pre-divorce designation of a spouse as the beneficiary of a life insurance policy. Under this section, the beneficiary designation loses legal effect upon the issuance of a court decree for divorce or annulment of a marriage. In this situation, the policy proceeds would go to the alternate beneficiary identified by the insured party. If the insured party didn't name an alternate beneficiary, the policy proceeds go to the insured party's estate upon death.
Effect of Divorce Decree
Section 9.301 provides three exceptions that allow an ex-spouse to remain as a beneficiary of a life insurance policy after issuance of the couple's divorce decree. The section allows an ex-spouse to keep his designation as a policy beneficiary after divorce if the divorce decree specifically designates the ex-spouse as the beneficiary. If the divorce decree doesn't include a provision naming the ex-spouse as the beneficiary, the ex-spouse can remain as a beneficiary if the insured party completes the insurance company's paperwork for re-designation. Alternatively, an ex-spouse may receive the funds as a beneficiary on behalf of or in trust for either the ex-spouse's child or dependent.
Life Insurance and Alimony
An individual may be able to keep life insurance on an ex-spouse after divorce because the couple's divorce decree requires it. A divorce decree or settlement agreement might specify life insurance as a requirement when one spouse must pay alimony to the other. Life insurance guarantees a measure of financial security for the ex-spouse receiving support in the event of the insured party's death. The life insurance proceeds compensate an ex-spouse for the loss of alimony. A divorce decree might also require ongoing reassurance that the insured party has continued to maintain the policy by paying the insurance premiums; the insured party may need to provide proof of payment or allow the insurance company to notify the beneficiary regarding missed payments.
Life Insurance and Child Support
An ex-spouse may also continue as the beneficiary on a life insurance policy because the proceeds would provide for the couple's child or another dependent upon the insured party's death. In addition, a divorce decree or child support order might include provisions regarding life insurance as a way to meet the insured party's child support obligations in the event of death. The policy might be used to pay past-due child support, as well as accelerate the payment of child support that would have been paid in the future. Texas law does not require life insurance as a way to guarantee child support. Rather, the parties must agree on the provision, or a Texas court must make the order.