Who owns life insurance in divorce

[Jenn of Ark]

What is the name of your state?Louisiana but moved to Arkansas

My new husband has whole life insurance policies in his name but with loans against them from his previous marriage. He is disabled; the insurance premiums were only paid by him and his ex-wife for 7 years. Then 25 years of premiums were waived because of his disability. Since he remarried me, he changed the beneficiary to me, but there is still cash value and there are significant debts against the cash value (policy loans) that were run up in his previous marriage. He has yet to handle the division of community property in the Louisiana divorce court. He has also filed Ch. 7, and his ex has also filed Ch. 7 separately. Both of them indicated that they wanted to reaffirm the life insurance policies in their bankruptcies.

In the split-up of community property, who ends up owning the cash value -- and the debt -- on the life insurance policies?

 

[lsut1ger]

Any equity/debt that was accrued during the marriage would be split equally between the two of them.

Edited to add:
Your husband may end up "owning" all of the equity/debt of the life insurance policies in the end, but this will be accounted for in the final "divying up"...i.e. she may get x asset and debts, he gets x asset and debts which happen to include the life insurance policies.

I'm a little confused about the 25 years of premiums being waived...how did that effect his equity? Does he simply get the benefit of the life insurance w/out a premium and w/out increasing his equity?

 

[Bigfoot]

The debt that you refer to in the life insurance policy is known as a policy loan. It may affect the face amount of the policy, which means that as a $100,000 policy, the company would suggest that only up to a certain amount should be taken out so that the policy still remains in effect.

If too much is taken out as a loan, and the insured dies, then the company may reduce the face amount of the policy to account for this loan. Depending on options selected during the policy period, the insured could ask for the cash value to be used to keep the policy in effect as well. So, the face amount could be reduced to $50,000 rather than $100,000.

The premium loans could only have been taken out by the policyowner--not the beneficiary.

The waiver of premium benefit is what allowed him to have the company keep the policy in effect and not require him to make payments during the period he was considered disabled.

The beneficiary doesn't inherit any 'loans' made against this policy. The beneficiary will receive the proceeds left of the face amount, either as a lump sum, or a series of payments, if desired.