The Moneyist: ‘It makes me angry’: My husband’s ex-wife has a $1 million insurance policy on his life. Can we cancel it?

Dear Quentin,

My husband and I have been married for almost 5 years. He has 3 kids with his ex. One just graduated high school, and the twins will graduate this coming year. His ex has a $1 million life-insurance policy on him that she says is to provide for child support should something happen to him. One of the twins lives with us full-time, and we only have $9,600 left on his child-support obligation. 

Their divorce decree stipulates that he must pay half of the policy, and he has been doing just that. I have never felt comfortable with this. She and her current husband don’t have the most responsible or safe lifestyle. She doesn’t work, and I frankly don’t trust them. It makes me angry to even think about it. If my husband died tomorrow in an accident, they would get $1 million because of his death.

“ ‘I just don’t want his ex and her husband to get this money because they have never contributed to the child support for the kids.’ ”

Is this legal? We have asked our lawyer before, but we did not get a straight answer, as this area is not a specialty. Once the child support is over, can we cancel it? It is in her name, but the policy has still been taken out on my husband’s life, and he never gave permission for her to get it in the first place. Once all the kids have graduated, and there is no financial obligation to her, should she be allowed to keep it?

We have our own policies, and I have even told him we could make a will that I agree to provide for college, weddings, etc., for the kids. I would do it anyway, even if there wasn’t documentation, because I love them and want them provided for. I just don’t want his ex and her husband to get this money because they have never contributed to the child support for the kids. They use their money to buy motorcycles and drugs.  

I know that any money from the life-insurance policy would contributing directly to their lifestyle. Her husband has failed two drug tests recently through Child Protective Services, and she has admitted to hard-drug use on videotape. I don’t want something that would be our family’s tragedy to be a payday for them. Please tell me there is some kind of legal recourse for us to cancel it. 

Hopeful, but Scared

Dear Hopeful,

Two challenges await you, and you have no control over one, but you do have complete control over the other. 

Let’s start with the first one. Your husband’s divorce decree and the life-insurance contract will tell you everything you need to know. My hunch is that your husband agreed to it and signed on the dotted line. If it’s in her name, she owns it. The contract will stipulate that your husband is either required to pay 50% of this policy until his children are no longer minors, or not. Such policies are not unusual for ex-spouses to protect themselves financially against the loss of child support and/or alimony should their former husband or wife die. 

If your husband agreed to contribute part of the premium, it’s highly unlikely it was taken out against his will. He may have said, “I didn’t want to do it.” But that’s not the same as his ex-wife taking a policy out behind his back, and committing fraud. Furthermore, he would be required to take a physical. What kind of life-insurance policy is this? If it is a term life-insurance policy, it will end after x number of years, and there will be no payout. If it’s a whole-life policy, the policy would also act as a “forced savings” vehicle.

“ The whole point of getting divorced is to move on to a new chapter, break the physical and emotional ties with your ex, and ideally lead a happy and peaceful life. ”

“Many divorce settlements these days are requiring life insurance policies be purchased and maintained to provide for alimony and child support in case the major bread-winner dies while alimony or child support is still owed,” according to the life-insurance company MassMutual. “The period of time for obligatory life insurance coverages may vary because they are dependent on the length of alimony and the ages of the children to be supported.”

And now to the challenge that you have control over. It’s not healthy to spend so much time thinking about your husband’s ex. You and your husband can spit nails about this arrangement, and look for ways to wriggle out of it — assuming he did agree to this when they divorced — and continue to drive yourself crazy over a potential payout if he predeceases his ex-wife. The whole point of getting divorced is to move on to a new chapter, break the physical and emotional ties with your ex, and ideally lead a happy and peaceful life. Instead, you want to wage another battle.

If you continue to ruminate over his ex-wife and this policy, all three of you may as well be locked in an unhappy marriage. And, really, what is the point of that?

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com, and follow Quentin Fottrell on Twitter.

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June 18, 2021 at 05:35AM
Quentin Fottrell
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