CSG Law Alert: Divorce and College: What You Need to Know About Planning Financial Support Payments
When a party has an obligation to pay ongoing spousal or child support or related obligations (such as college), the obligation may also include a requirement for “security” or some financial safeguard intended to meet the obligation in the event of death of the obligor.
What is the most common form of security?
Life insurance is the most commonly used form of security. Parties may agree, or a court may require, that an obligor maintain a life insurance policy to secure an obligation for spousal support, child support and even college expenses.
In some situations, the policy amount stays the same for the entire duration of the support obligation. In others, coverage may decrease over time to parallel the anticipated outstanding obligations.
Are there other types of security?
Yes. While life insurance is common, it may not always be suitable, depending on factors such as age, health or even the amount or duration of the obligation. Other options may include:
- A trust funded with a designated amount
- A bond
- A designated cash or investment account
These alternatives to a life insurance policy may provide funds that can be accessed if support payments are not made.
What if the required security is not maintained?
Settlement agreements may include provisions to address what happens if required security is not maintained. Failure to have in place requisite security may open an obligor or an obligor’s estate (in the event of death) to litigation.
For more information on this issue or other family law matters, please contact the author of this article or the Family Law Group at CSG Law.