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Life Insurance and Alimony in New Jersey

Sad mother with son counting alimony at home

Life insurance often becomes a contested issue in New Jersey divorces. It can feel like adding insult to injury to have to maintain a life insurance policy for the benefit of a former spouse, but the law has reasons for requiring alimony payors to do so. The New Jersey Appellate Division recently issued an opinion that provides detailed guidance on the use and proper calculation of life insurance in a New Jersey divorce. The opinion is published, meaning that it is binding precedent for future cases. Read on to learn about the case and reach out to a knowledgeable New Jersey alimony attorney if you have any questions about New Jersey family law.

Life insurance is meant to secure alimony

The family law case titled S.W. v. G.M. deals with disputed issues in a final judgment of divorce and a subsequent amendment. Among other things, the appeal specifically concerns the defendant’s motion to reconsider the family court’s decision regarding life insurance and alimony. Following a prior appeal, the family court had amended the judgment of divorce reducing the amount of alimony owed by the plaintiff (the primary breadwinner of the family) to the defendant.

In reviewing the trial court’s order regarding life insurance, the Appellate Division emphasized that the purpose of life insurance is to secure the award of alimony. The payor of alimony should keep a life insurance policy for the benefit of the alimony recipient. The amount of the policy payout depends on a variety of variables and “should neither only meet a beneficiary’s bare needs, nor be a windfall.” The court warned that if an alimony payor maintains a policy that just meets the bare minimum, “unexpected changes in circumstances can leave a beneficiary with unmet needs. In contrast, ordering a payor to maintain a policy that is too high “exposes a payor’s estate to obligations he or she never had during the marriage.”

The Appellate Division gave detailed guidance as to how to calculate the proper amount of life insurance in light of an alimony award. After alimony is determined (based on appropriate analysis of income and marital lifestyle), life insurance should be determined based on the continuing present value of the alimony obligation. The value should diminish over time as the responsibility is paid off. If the future value of an obligation is hard to determine “because the duration of the obligation is unknown, a trial judge may utilize an obligor’s life expectancy to determine the duration of the obligation if it is reasonable to do so.” The court allowed for different approaches for calculating the total obligation depending on the facts of the case: “determining whether to use life expectancy or the presumptive retirement age, and a fixed or declining amount of security will depend on the circumstances of each case and is a matter of judicial discretion.”

Here, the Appellate Division reversed the alimony determination as well as the life insurance determination. Regarding life insurance, the appeals court reversed because “there was no testimony, and only a disputed assertion regarding plaintiff’s potential retirement at the full social security age.” Moreover, the appeals court advised the trial court to use the calculation methodology outlined in the opinion for alimony and life insurance.

Help With Alimony Issues from a New Jersey Divorce Attorney

If you’re in need of dedicated and talented legal help with alimony, divorce, or other family law matters in New Jersey, contact the Union offices of family law attorney John B. D’Alessandro at 908-964-0102.

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