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The Matrimonial StrategistLJN NewslettersNewsSections

Term Life Insurance in Divorce Cases: A New Deal

By Paul L. Feinstein
November 30, 2003

As circumstances change, matrimonial practitioners must review the law in certain areas to see if those laws need to be amended to keep pace with changing times. For example, the onset of AIDS has created almost a new class of terminally ill people. These people who are involved in divorce cases may find themselves in a legal conundrum when it comes to term life insurance benefits. Traditionally, under prior law in some states, only cash surrender value was deemed property. See, e.g., In re Marriage of Mullins, 121 Ill.App.3d 86, 458 N.E.2d 1360 (Ill. 4th Dist. 1984). Historically, term policies, therefore, had no value in divorce proceedings. Those cases, however, may be distinguishable where the insured was not terminally ill, and the proceeds therefore become much less speculative. Those cases were also decided before the appearance of Viatical Settlement Acts (designed from the National Association of Insurance Commissioners Model Act) changed the public policy of many states. Those Acts specifically allowed insurance policies, including term policies, to be sold (albeit normally at a deep discount).

I was recently involved in a case where my client was terminally ill. His wife owned a term policy on his life and claimed it should be awarded to her at a zero value. In such a situation, you might want to have a viatical company make an offer on the policy. It will be hard for your opponent to argue the policy isn't worth at least what the company is offering. Further, you could make a dissipation claim if the side that owns the policy, refuses to take the offer, or, if feasible, consider asking the court to order the parties to effectuate the transaction.

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