Posted by Tom Carolan on Thu, Feb 25, 2010 @ 12:39 PM
If you are one of the many Americans who will face divorce, you know that there are many things to consider. One of those things is the security of your alimony payments. If your former spouse becomes disabled and can't work, what will become of your alimony payments? Luckily, you can request that an individual disability insurance policy be maintained by your ex, to make sure alimony continues even if he can not work. Many good lawyers make this a standard request when negotiating divorce settlements these days.
The facts are that an individual has a 30% risk of becoming disabled for 3 months or more between now and the time he or she is 65. Average disability duration is 3.2 years in length. If your ex were to suffer a disability that kept him from work for a long time period, how would your alimony get paid?
Different Types of Disability Insurance
Disability insurance is exactly what is needed to ensure that an individual can survive and meet his or her financial obligations in the case of becoming disabled. There are three different types to choose from. Long-term disability coverage is available through your workplace. Plans are also available through professional groups and unions. Individual disability insurance is the third option and the best one. It is typically the option that provides the best benefits with the loosest set of qualifications, making it easier to become eligible. While this is also the most expensive of the three types, it is the most secure. If you are looking to protect your alimony, make sure that your lawyer includes a clause in the divorce agreement that your ex must maintain a private individual insurance plan.
The Reality of Disability
More than 90% of disability claims result from common illnesses such as heart disease, diabetes, cancer, stroke, MS and back and neck problems. Such illnesses often begin without warning unless you have major risk factors for them. Despite the fact that it is rather unfortunate when illnesses happen to anyone, you would still be concerned about your alimony should your former spouse fall ill. However if he or she carries disability insurance, you can feel more at ease about it.
Even though a disability insurance policy is just one of the multitudes of things to think about when planning a divorce, it can make a huge difference to your financial future. Get started today looking for an individual policy for yourself and get the information you need to pass along to your former spouse.
Posted by Tom Carolan on Thu, Feb 25, 2010 @ 12:25 PM
Division of property is one of the most complicated aspects of divorce. Disability benefits are one of the many things that couples have issues about in the division of property. However, differing state laws affect how such benefits are treated. Those who receive disability benefits do so in lieu of earned income because they are ill or injured. In the case of divorce, the division of such benefits depends on a variety of factors. Some states consider such benefits to be marital property while others consider it separate property. How is it considered by the courts will help to determine the way it is dealt with during the divorce. What helps to determine this is when the payments began and the findings of a purpose analysis concerning the benefits.
The Timing of Benefits
In many states, anything acquired during the marriage is considered to be marital property, including disability benefits. Certain states like Montana, New Jersey, Louisiana, Illinois, Arkansas and Delaware, even consider disability payments after the marriage is over to be marital property if they were based on work during the marriage. In such cases, the date that eligibility for disability benefits was determined is important for the divorce and division of property.
In other states, only income that originates during the marriage is considered to be marital property. In this case, if the person was eligible for benefits prior to the marriage and they continued during it, the spouse is not entitled to claim such benefits as marital property. New Mexico, Minnesota, Arkansas, Idaho, Maryland, Delaware, Minnesota and in some circumstances Texas, subscribe to this theory.
States including Florida, Alaska, Idaho, Indiana, Colorado, Louisiana, North Carolina, Maine, Missouri, Maryland, Pennsylvania, Oregon, Washington and Rhode Island take the replacement approach when it comes to the subject of disability income. This means that the disability benefits are only marital property because they replace income. Such benefits are therefore limited to the duration of the marriage only. Benefits received following divorce are considered separate property even if the qualifying disability occurred during the marriage.
The Analysis of the Purpose of Benefits
In many situations, a court will analyze the exact nature of the disability payments and determine if they are to be considered marital property or separate property. If they are deemed to be deferred payments based on work done during the marriage, they will be considered to be marital property.
Anyone who has a private disability insurance pension is subject to even more scrutiny concerning the purpose of the benefits he or she is receiving. Often they will be deemed to be a combination of both separate property and marital property. The percentage will depend on how long the marriage lasted, how long the contributing employment lasted and what the pension is intended for. If it is for pain and suffering and as a replacement for the lost ability to earn income, it is separate property. If it is in lieu of a retirement package, it is more likely to be deemed marital property.
If you are embroiled in a divorce it is important to understand the role of disability benefits in it. Ask your lawyer if you are eligible to receive some of your spouse's disability income following divorce. Ask about the state laws concerning the divisibility of such benefits. Ask if private disability benefits are considered marital or separate property. It is important to be forearmed with knowledge prior to working on a divorce settlement.
Posted by Tom Carolan on Thu, Feb 25, 2010 @ 12:11 PM
Individuals facing a divorce and an uncertain future for themselves and their family need to make some important financial decisions. A crucial part of any financial plan is to plan for risk and worst-case scenarios. Therefore looking at two important types of insurance that every person in the workforce should carry is crucial. These are life insurance and disability insurance.
Life Insurance Concerns Following Divorce
Life insurance will pay your survivors a pre-set amount of money in the case of your death. This is extremely important to carry if you have a family. If you have become the main source of income in the family due to divorce, you may need additional life insurance coverage. If you pay child support, you should establish a life insurance policy which will continue those payments if you were to die. If your former spouse pays child support, consider making such a policy a part of the divorce agreement.
Be sure to change the beneficiary of your life insurance policy following the divorce. Even if you have a policy in place to continue your child support payments, do not have your ex-spouse as the beneficiary. It is also important to remember to review all other beneficiary designations following divorce. Most people prefer to remove former spouses as beneficiaries but it can easily be overlooked especially with older policies.
Understanding Disability Insurance
Disability insurance will provide a monthly income for you if you become unable to work due to illness or injury. The insurer that you pay your premium to each month will pay out disability benefits if you need them. Surprisingly those between the ages of 25 and 55 are at double the risk of becoming disabled compared to dying, however fewer of them carry disability insurance than life insurance. Disability insurance is a very necessary type of coverage for most people of that age group to carry because they do not have the financial security to live for long periods of time without an income. This is especially true following divorce.
There are different types of disability insurance policies. How a policy defines a disability affects the price and allure of it. If an insurance policy has a broad scope it will allow for disability payments to be paid as long as the individual cannot perform usual tasks of his or her job. This is the more expensive type of disability insurance. The cheaper kind limits the definition of disabled, so that the policyholder must not be able to perform any type of gainful employment in order to receive benefits.
When purchasing disability insurance it is important to consider your monthly expenses in order to figure out how much coverage you will need. Tally the basics and then consider additional expenses that may increase due to a disability. Subtract any investment income, disability benefits from your employer and other income not affected by your ability to work. This will tell you how much individual disability insurance you need to purchase. Insurers usually allow you to purchase coverage for 60 to 70 percent of your regular gross income, as an incentive to return to work. However, if you have paid for your premiums with after-tax dollars, you will be receiving your benefits tax-free.
If you consider Social Security to be your own method of disability insurance, you might want to reconsider. It is very hard to qualify for those benefits. Typically you must have a fatal illness or be completed incapacitated so that you can do no work of any kind for a minimum of 1 year. It also takes approximately 6 months to receive any payments.
If you are under the age of 65, you have twice the chance of suffering a disability that will last three months or more, than you are of dying. For this reason, it is important to carry disability insurance. Following a divorce it is even more critical. Without the security of a spouse's income to help cover necessary expenses, they all fall on your shoulders. Protect everything you have worked for with an independent disability insurance policy.