Divorce court can require life insurance

A fairly common life insurance beneficiary dispute involves designations in favor of former spouses. Under the Texas family code designations in favor of former spouses are automatically revoked by operation of law. However an exception is if the divorce decree specifically provides that the former spouse will be designated as the beneficiary of a life insurance policy.

Often a court will order this to secure child support obligations. A Texas case from the El Paso Court of Appeals involved a husband and wife divorcing with children. The trial court ordered standard child support obligations for the children. The court also ordered that the husband maintain a life insurance policy in the amount of $350, 000 and designate the ex-wife as the beneficiary of the policy for the children, up until the time that the last child reached the age of 18.

The husband subsequently let the policy lapse and the former wife went to court and sought a contempt order against him. The court twice found him in contempt. The husband argued to the court of appeals that the trial court did not have the authority to order him to maintain a life insurance policy designating the ex-wife for the benefit of the children. He also argued the court did not have the authority to find him in contempt for failing to do so.

The court of appeals rejected both arguments. It noted that Texas Family Code Section 154.013 specifically provides that a child support obligation does not terminate on the death of the obligee. Instead, it continues as an obligation to the child named in the support order. Further, the Texas Family Code Section 154.016(a) provides that a court may order a child support obliger to obtain and maintain a life insurance policy that will establish an insurance funded trust or an annuity payable to payable to the other parent for the benefit of the child. The court of appeals found reasonably that the purpose of maintaining a term life insurance policy is to ensure a child support obligation is met after the obliger's death. That is consistent with the policy of the state of Texas to ensure that a parent has the assets to care for minor children.

These are complex issues and it's very important that if you have a facing a life insurance dispute that you contact us for a free evaluation.

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