Can Child Support Garnish Life Insurance?

When a minor kid is involved in a divorce or child custody case, one parent may be granted primary custody while the other is ordered to pay child support. When one parent lives far away from their child’s primary residence, has a considerably larger income than the other parent, or is willing to pay child support, a situation like this can occur. Most court rulings involving a minor kid include a requirement that one parent pay child support for the child’s benefit.

Kid support is a legal obligation that derives from a parent’s legal obligation to support their minor child financially. This financial support obligation usually ends when the child reaches the age of majority, which is 18 years old and has completed high school.

Unfortunately, it is not uncommon for a parent who is compelled to pay child support to pass away before their child reaches the age of 18 and graduates from high school. Most jurisdictions have rules in place to ensure that child support obligations do not end when the obligor passes away. Following the unfortunate and unexpected death of a parent who is due to pay child support, this article covers ways to guarantee your child receives adequate financial support.

Legal Background for Posthumous Child Support Obligations

154.015(b) of the Texas Family Code “If a child support obligor dies before the child support obligation expires, the remaining unpaid balance of the child support obligation becomes due on the obligor’s death date.” As a result, when the parent who was ordered to pay child support dies, the whole amount of the child support obligation is due. Even if child support payments were made in monthly installments, the rest of the obligation must be paid in full when the support-paying parent passes away.

Child support requirements last longer than spousal support duties, which usually expire when one of the spouses passes away. This distinction reflects public policy that recognizes the importance of financial support in a minor child’s future. A single parent’s financial success, home life, and education can be challenging if a child support obligation is ended after a parent’s death.

Many options exist for a deceased parent to meet their ongoing child support obligations. It’s vital to remember that the deceased parent’s testamentary estate is still liable for unpaid child support. A sort of inheritance or a trust could be one option to meet the child support requirement. Another option for meeting a child support obligation is to probate a parent’s estate and sell any residual assets. Unfortunately, during the administration of a deceased parent’s estate, issues such as creditors or an illiquid estate can tie up and potentially damage the inheritance of their surviving kid.

Furthermore, the estate of a parent who is entitled to pay child support may not have sufficient assets to meet the child support obligation. A parent can prevent this painful scenario by purchasing and keeping a life insurance policy. A court may force a parent who is obligated to pay child support to purchase and maintain a life insurance policy if the parent is hesitant to do so. 154.016(a) of the Texas Family Code states:

“A child support obligor may be ordered by the court to obtain and maintain a life insurance policy, including a decreasing term life insurance policy, that will establish an insurance-funded trust or annuity payable to the obligee for the benefit of the child that will satisfy the support obligation under the child support order in the event of the obligor’s death.”

As a result, a court might require a parent to buy and maintain a life insurance policy to ensure that their kid has enough financial support until they reach the age of 18 and graduate from high school. It is critical to plan ahead in the event that the parent who is expected to pay child support passes away, and to consult with a qualified family law expert who can advise you on the choices available to you under the law.

When establishing a requirement to keep life insurance to meet a child support obligation, a Texas court will consider the following factors:

  • The current value of the child support payments due until the child reaches the age of 18 and graduates from high school;
  • The current value of the periodic cost of insurance premiums required to benefit the youngster until he or she reaches the age of eighteen;
  • Whether a child has special needs or is pursuing an education that will last till adulthood.

The factors stated above are only a few of the many that can be reviewed with one of our experienced family law attorneys during a consultation. We can talk about how to plan for your child’s financial future if the parent who is required to pay child support dies, or what your legal alternatives are if the parent who is required to purchase life insurance refuses.

Can child support take money from a life insurance policy?

Many couples prefer to name their ex-spouses the beneficiaries of their life insurance policy, even if they are separating or divorcing. If the purpose of the designation is to support the couple’s children, the surviving ex-spouse has a moral obligation to spend the monies in accordance with the separation agreement, that is, to replace the child support that the payor spouse or parent would have supplied.

This classification, however, may have significant disadvantages. The proceeds of the life insurance policy are not protected from the creditors of the ex-spouse (or ex-partner). They may also be liable to claims from his or her current spouse if he or she files for bankruptcy. Furthermore, there is no guarantee that the assets will be used for the children by the surviving husband. Even so, many people choose this arrangement because they believe their ex-spouse (or ex-partner) will have the same willingness to care for their children if the payor parent dies.

Can life insurance payouts be garnished?

Because life insurance benefits become the beneficiary’s property at the time of disbursement, the IRS cannot confiscate them to settle a tax debt. In fact, the IRS is not allowed to garnish life insurance premiums or payouts.

Can debts be collected from life insurance?

  • If your spouse is your beneficiary and you co-signed certain types of loans, the proceeds may not be exempt.
  • Once your beneficiary receives your life insurance death benefit, creditors seeking money owed to you may claim those funds (depending on state regulations)

If you have debt, you might be concerned about creditors being able to claim your life insurance proceeds after you pass away. The proceeds of life insurance are usually exempt from the creditors of the insured person, although there are a few exceptions.

Can a lien be placed on life insurance?

Assets such as life insurance policies can still be subject to judgment liens and tax liens. If the policy’s cash surrender value is sufficient to cover the loans.

Can a non custodial parent get life insurance on child?

The quick answer is yes if you’re asking if you can get a life insurance policy on your ex-spouse or your child’s mother or father. You can normally get a life insurance policy on someone’s life if you can show that you have a “insurable interest” in them.

If you have an insurable interest, you could face a significant financial loss in the event of someone’s death. It is frequently illustrated in the case of an ex-spouse or co-parent because their death may result in the loss of financial support for the remaining children or former spouse.

Purchasing an insurance on your ex-spouse or partner, on the other hand, necessitates their knowledge and participation. It’s also when things start to get a little more difficult. If your relationship with your ex is strained, or if they are simply uninterested in your or their child’s well-being, it may be difficult to persuade them to agree to the terms of life insurance coverage.

The question of who should pay for a life insurance policy’s premiums can also be tricky. If your ex does not believe that he or she should be responsible for paying the premiums on his or her alone, they may recommend that you share the cost of the premiums in half. If you’re concerned that co-managing the policy will entail too much wrangling or become too unpleasant, you might want to try paying your premiums on your own.

A divorce settlement may mandate the non-custodial parent to get a life insurance policy on their own life for the children’s benefit. They may be put in contempt of the divorce decision if they fail to acquire or maintain insurance. If you’re in the process of a divorce, talk to your divorce attorney about including such a requirement in your divorce settlement if it’s required. It may be more effective to settle this subject in divorce court than than pursue it on your own and after the fact.

How far back can child support be claimed?

The Supreme Court of Canada held in September 2020 that retroactive child support may be paid even if the child has reached the age of majority and is an adult at the time the claim is made.

What is Retroactive Child Support and Why Does it Matter?

Money owed to a party on a retroactive basis is referred to as retroactive child support. This could be because they didn’t pay any child support after their divorce, or because they didn’t pay the correct amount of child support under the Federal Child Support Guidelines. In most cases, retroactive child support claims are allowed to go back three years. However, because child support is a right of the child, and there are many circumstances that contribute to the amount and length of child support payable, this is a gray area susceptible to interpretation by the courts. For example, if one party falsifies their income or threatens the other parent in any way if they pursue child support claims, the court may award retroactive child support going back more than three years – even if the kid is an adult at the time the claim is filed.

Michel v Graydon: Determining Factors in the Supreme Court Ruling on Retroactive Child Support

The parties in this case were in a four-year common-law relationship and had a son during that time. They signed a Separation Agreement when their relationship ended, outlining the details of child support. Because the child lived with the mother, the father was required to pay child support on a monthly basis in accordance with the terms of the Agreement. The father’s income, on the other hand, was not accurate in the Agreement and was significantly lower than his genuine income. As time went on, his income increased even more, resulting in a significant disparity between his child support payments and guideline income. Because the mother received government help, the child support was assigned to the Minister under the Employment Assistance Act, who never asked to have the terms of the child support payable reviewed.

The Outcome of Improper Disclosure and Blameworthy Conduct

The mother filed an application in 2015 to address the issue of child support not being paid in accordance with the father’s previously erroneous but now higher income. Because the child was considered an adult at the time she filed this application, the courts first denied her request to modify support. After many court hearings and appeals, the Supreme Court of Canada heard the case and ordered $23,000 in retroactive child support to be paid. The court’s reasoning for awarding retroactive child support was that the father had engaged in culpable behavior by failing to fully declare his income when signing the Separation Agreement.

Our Calgary-based mediators can assist you if you have questions concerning ongoing or retroactive child support. Contact us today so we can make sure you understand your legal rights and responsibilities when it comes to calculating retroactive child support.

What debts are forgiven at death?

What Types of Debts Can Be Forgiven When You Die?

  • Debt that is secured. If the dead had a mortgage on her home when she died, whoever inherits the property is accountable for the debt.
  • Debt that is not secured. Any unsecured debt, such as a credit card, can only be paid if the estate has sufficient assets.

Is a life insurance beneficiary responsible for debt?

No, you don’t have to spend life insurance earnings that are payable directly to you to pay off your parent’s or another relative’s debts.

If you’re the specified beneficiary on a life insurance policy, you have complete control over the funds. Unless the loan is also in your name or you cosigned for the obligation, you are not accountable for the debts of others, including your parents, spouse, or children.

Community property states are an exception to this general norm. If your deceased spouse’s obligations were “community” debts in those states, you’re likely accountable for them.

Life Insurance Proceeds Belong To The Beneficiary

You own the money if you’re the beneficiary of a life insurance policy. Your mother’s creditors will not be able to compel you to use it to pay off her debts.

Consequences of Unpaid Debt

If the debts are not paid, you may face consequences. (However, these repercussions have nothing to do with your entitlement to keep the life insurance money.) If your mother possessed property that had to be transferred through probate, or if the property had liens on it, the consequences would be different.

Claims Against Probate Property

Your mother’s creditors will be allowed to submit claims in the probate estate if she had assets that needed to be transferred through probate. Property that must be transferred through probate is usually property that your mother had sole legal title to, such as real estate, bank accounts, or automobiles. The property will not be transferred to the heirs until the administrator or executor has paid all of the bills, according to the probate court.

If you’re planning to file a probate estate, consider whether it’ll be cheaper to settle with creditors now rather than having the administrator or executor pay them later. An attorney can assist you with this.

Liens Against Property

If a creditor held a lien on the property prior to your mother’s death, the lien must be paid before the property can be sold or transferred. If your mother’s mortgage is not paid, for example, the mortgage lender may foreclose on her home. Similarly, if your mother bought a car and was making payments on it, the lender could take it away from her. Working with these creditors may make sense if you wish to keep these assets or sell them yourself.

Other Debts

Other creditors, such as credit card companies and medical providers, will be out of luck if your mother didn’t have assets that needed to be transferred through probate. These creditors have no legal authority to compel you or any family to pay the debt, and they have no other means of collection.

Stopping Debt Collector Harassment

Simply because you aren’t accountable for the debt doesn’t mean creditors or debt collectors won’t try to force you to pay it. If a creditor or collector is pursuing payment for a debt owing by someone who has died, offer to submit a copy of the death certificate to the creditor or collector. Know that if the harassment persists, you can safely ignore it. You also have the right to file a complaint with the Federal Trade Commission, the Consumer Financial Protection Bureau, or your state’s consumer protection agency if you are being harassed by debt collectors.

Is Whole life insurance protected from creditors?

The United States government recognizes the need of life insurance in family financial planning. There are rules in existence that insulate some life insurance from bankruptcy and creditors, in addition to the tax benefits of life insurance.

Creditors are only interested in your existing matured assets when you file for bankruptcy. There is nothing for creditors to go after because a term life insurance policy does not mature until you die. This article will refer to the death benefits and cash values of permanent life insurance plans such as whole life and universal life while addressing bankruptcy.

If a creditor tries to make a claim on the proceeds of a life insurance policy in a non-bankruptcy situation, the laws of the state where you live will usually determine what occurs. Unless the death benefit proceeds are paid to the policyowner’s estate, the proceeds of a life insurance policy are generally shielded from the policyowner’s creditors. However, unless there are specific state protection laws in effect, the proceeds are not automatically exempt from the creditors of your policy’s beneficiary. To learn more, keep reading.

Does debt pass to next of kin?

No, if a person dies with a debt, the loan does not disappear. In most cases, the estate of the deceased person is responsible for settling any outstanding obligations. Any debts are paid from the estate’s funds, not from the individual’s own funds.