In terms of the overall divorce process, the valuation of life insurance probably doesn’t play a major role. However, Apple Valley, MN divorce lawyers are aware of the laws for valuing marital assets like life insurance, and they will make sure that their clients get the most out of any division.
The are different kinds of life insurance policies. Some life insurance policies are divisiable in a divorce while others are not.
On one hand, life insurance policies like “term insurance” are generally not divisible as a marital asset. Why? Because term life insurance provides for a benefit upon death but has no immediate cash value. While not generally divisible as a marital asset, term life insurance can be used as security for things like child support, spousal maintenance, or property awards.
On the other hand, life insurances policies which have a cash value are capable of being valued and divided for purposes of a marital dissolution or legal separation.Whole life or ordinary life insurance policy has a cash value that is frequently used for loan purposes or for accumulation of asset purposes.
Thus, we know that cash value is the key term to look at when deciding whether life insurance can be divided as a marital asset.
Furthermore, annuities are classified similarly to life insurance policies. If an annuity has a cash value, that cash value may be taken into consideration for purposes of valuing and dividing marital assets. Otherwise, the annuity itself may sometimes be divided “in kind.”
The point I am trying to make is that courts look at “cash value” at the time of the divorce when making determinations about what is and what is not a divisible, marital asset. As I’ve discussed in prior posts, there are many factors that go into division of marital property; including, valuation date, date of acquisition, pre-marital, and post-valuation date property. Obviously, talking with a qualified divorce attorney in your state is going to help with understanding these terms.
In sum, my general recommendation to clients is to work with your attorney on gathering all suspected marital assets. If you are not sure whether your life insurance or annuity has an immediate cash value, include it on a marital balance sheet and talk to your lawyer.
You may think that it has immediate cash value and your lawyer may think otherwise. However, failing to find and inventory marital assets is a great way to lose an interest in marital property that would have otherwise been divisible.
