This Week’s Blog by Jaime S. Dursht.
Typically families and couples rely on a single health insurance coverage plan, either through the spouse’s employer or privately, to maintain coverage for the entire family. Once a Judgment of Divorce is entered, the non-subscribing spouse is no longer eligible for coverage under the former spouse’s policy.
DURING THE DIVORCE
Many divorce clients in Fairfield County, such as Greenwich or Darien, have life insurance policies, or their spouses do. At the inception of the divorce case, it is important for both sides to ensure that whatever life insurance policies exist at the time of the filing are maintained throughout the divorce case. Life insurance policies owned by a party should be disclosed on his or her Financial Affidavit, but it is common practice for divorce attorneys in Fairfield County, Connecticut to request copies of all life insurance policies as part of their discovery requests. By reviewing the policies, the client and the attorney can discover what the terms of the policies are and what the coverage is, which is important to know for settlement negotiations and trial preparation. For example, if a party owns a term policy, one needs to know when the policy ends and if the premiums increase after a certain date.
It is critical for the client and the divorce attorney to ascertain who the beneficiaries of any life insurance policies are. People going through a divorce sometimes change the beneficiary of a life insurance policy during the pendency of the case from a spouse to another third party, such as a boyfriend, girlfriend, or another family member. In Connecticut, such an action is a violation of the Automatic Orders. If a divorce attorney discovers that the opposing party has changed the beneficiary of his or her life insurance policy during the pendency of the case from his or her spouse to someone else, or has let the policies lapse by failing to pay the premiums, he or she can file a motion in order to request remedies from the Court.
Whole life insurance policies with cash value are assets that can be divided in a divorce case. Usually the spouse owning the life insurance policy keeps the policy and the other spouse receives his or her share of the cash value by receiving more of another asset. Sometimes, parties cash out their life insurance policies at the time of the divorce and divide the net proceeds. Whether or not this is advisable is something that a party must discuss with his or her divorce attorney. Loans against the cash value of whole life insurance policies must also be considered as part of the final judgment.
Some Fairfield County divorce clients have life insurance trusts that own their life insurance policies. In those instances, the divorce attorney must obtain a copy of the trust in order to review the terms. Some life insurance trusts exclude the other spouse as a beneficiary upon the filing of a divorce action and others exclude an ex-spouse. It is advisable for divorce attorneys to work closely with the parties’ estate planning attorneys in order to determine the best way to address these trusts in the divorce action.
AFTER THE DIVORCE
Pursuant to Connecticut General Statutes Section 46b-82, life insurance can be ordered by a Court in a divorce case as security for a party’s alimony obligations. Life insurance is also commonly used as security for a party’s child support or college obligations. In more complicated cases, life insurance can be put in place as security for certain property division orders in the event that a party dies prior to distributing property to the other party.
Under General Statutes Section 46b-82, a party may not be ordered to maintain life insurance after the divorce if he or she can prove by a preponderance of the evidence that he or she is uninsurable or cannot pay the cost of the life insurance premiums. For parties with health concerns or who do not have the ability to obtain affordable life insurance because of their age or other reasons, it is important to plan to present evidence to the Court at the time of the divorce trial on this issue.
Connecticut law does state that a party’s obligation to maintain life insurance is modifiable; so, if a party experiences a substantial change in circumstances, such as the loss of a job, he or she has the right to file a motion in Court to determine whether his or her life insurance obligation can be modified.
Experienced divorce attorneys will include in their divorce agreements that a party who is ordered to maintain life insurance provide the other party proof at least annually that the life insurance is in place and that the beneficiary of the policy or policies is the other party. The party who is the beneficiary of the life insurance coverage should monitor this carefully after the divorce, as a lapse in coverage can be irreversible in some situations.
CAN YOU REMOVE YOUR SPOUSE FROM HEALTH INSURANCE DURING DIVORCE?
No. First, health insurance regulations do not allow the removal of a covered beneficiary from a policy except during specific periods, but Connecticut Family Law also prohibits removal during the pendency of a divorce action. Doing so is a violation of orders that go into effect at the inception of a divorce case and may result in court-ordered penalties and remedial action.
WHAT IS COBRA AND IS ITS COVERAGE AUTOMATIC?
COBRA is the acronym for Consolidated Omnibus Budget Reconciliation Act, the federal law that allows a spouse who loses coverage due to divorce to continue coverage under the same plan for thirty-six months. The spouse who elects COBRA coverage must take steps with the policy plan administrator and pay for the continued coverage individually. It is advisable to comparison shop before divorce is final to determine whether COBRA coverage is the right option because it is temporary and can be costly.
WHICH SPOUSE IS OBLIGATED TO PROVIDE HEALTHCARE COVERAGE FOR THE CHILDREN?
The State of Connecticut requires parents to provide health insurance for minor children according to their respective abilities until the later of child/ren reaching the age of 18 or graduating high school but no later than the age of 19. In a divorce, it is typical for the spouse whose coverage is in effect at the time of divorce to agree to continue doing so for so long as it remains available through an employer at a reasonable cost. If it is no longer available to that spouse at a reasonable cost, then the other spouse typically agrees do so if available through an employer at a reasonable cost. If it is not available to either spouse, then both may agree to share the cost of private coverage or apply for HUSKY coverage. Many divorcing parents, agree for health insurance to extend to age 26, the maximum allowable age limit in Connecticut, or until the child is able to secure health insurance through his/her own employer, spouse or domestic partner.
HOW ARE UNREIMBURSED AND UNINSURED MEDICAL EXPENSES PAID AFTER DIVORCE?
Divorced spouses are responsible for his/her own unreimbursed and uninsured medical expenses, including dental, vision and prescriptions. For as long as either parent is responsible for a child’s health insurance, unreimbursed and uninsured medical expenses are paid in proportion to each parent’s percentage share of combined net income but the parties may also to pay according to a different percentage that is negotiated.
CAN I OBTAIN INFORMATION REGARDING MY SPOUSE’S LIFE INSURANCE COVERAGE DURING A CONNECTICUT DIVORCE?
As part of the discovery (i.e., information gathering) phase of any Connecticut divorce case, it is critical that both sides disclose to one another information regarding any life insurance policies in place at the time, including life insurance policies provided through employment and life insurance policies held in a life insurance trust. Each party has an obligation to disclose any life insurance policies on his or her life on a Financial Affidavit. Even if a life insurance policy is held in a life insurance trust, it should still be disclosed on a Financial Affidavit, though not all parties do so. It is common practice for Fairfield County divorce attorneys to request copies of life insurance policies and life insurance trusts as part of their formal discovery requests in order to obtain necessary information about insurance coverage.
CAN I CHANGE THE BENEFICIARY OF MY LIFE INSURANCE POLICIES DURING A CONNECTICUT DIVORCE?
In Connecticut, changing the beneficiary of life insurance policies while the divorce action is pending is a violation of the Automatic Orders. If a divorce attorney discovers that the opposing party has changed the beneficiary of his or her life insurance policy during the pendency of the case from his or her spouse to someone else, or has let the policies lapse by failing to pay the premiums, he or she can file a motion in order to request remedies from the Court.
IS LIFE INSURANCE AN ASSET THAT A COURT CAN DIVIDE?
Generally speaking, life insurance policies are not assets divisible by a Connecticut Court. The cash value of any whole life insurance policies, however, is an asset that can be divided in a divorce case. Typically, the spouse who owns the whole life policy will keep the policy and the other spouse will receive an asset equivalent to his or her one-half share of the cash value.
WILL LIFE INSURANCE BE INCLUDED IN THE FINAL ORDERS IN MY CONNECTICUT DIVORCE?
Can I Use My Life Insurance Trust to Satisfy My Life Insurance Obligation?
It is common in Fairfield County for divorce clients to have life insurance trusts that own their life insurance policies. In cases where there is a life insurance trust, the divorce attorneys must obtain a copy of the trust in order to review the terms. Some life insurance trusts exclude the other spouse as a beneficiary upon the filing of a divorce action and others exclude an ex-spouse. Many times experienced divorce attorneys will work with the parties’ estate planning attorneys in order to determine the terms of the trust.
WHAT IF I CANNOT AFFORD LIFE INSURANCE?
General Statutes Section 46b-82 provides that a party may not be ordered to maintain life insurance after the divorce if he or she can prove by a preponderance of the evidence that he or she is uninsurable or cannot pay the cost of the life insurance premiums. If a party has health issues or has other reasons, including age, for not being able to afford life insurance, he or she can request that life insurance not be ordered, or that it a reduced amount of coverage be ordered.
IS MY LIFE INSURANCE OBLIGATION MODIFIABLE?
Unless there is an Order precluding a party from modifying his or her life insurance obligation, most life insurance Orders in Connecticut are modifiable by law if a party can prove a substantial change in circumstances.
ARE FORMER SPOUSES ELIGIBLE FOR MEDICARE BENEFITS?
Medicare is a national health insurance program that provides health insurance for individuals and their spouses who are 65 years and older and who have paid Medicare taxes for at least ten years. After a divorce, one may still be eligible for Medicare based on the former spouse’s work history. In order to qualify using a former spouse’s employment history, one must be unmarried and at least 62 years old, the marriage with the former spouse must have lasted for at least ten years, and the benefit from one’s own employment history is less than that of the former spouse.
The attorneys at the firm of Broder Orland Murray & DeMattie LLC, with offices in Westport and Greenwich, Connecticut, are very experienced in all facets of divorce including issues that involve healthcare coverage for the parties and their children.