Planning for the Unforeseen: Securing Maintenance with a Life Insurance Policy

At the end of divorce proceedings, parties enter into a Marital Settlement Agreement (“MSA”) with their soon-to-be ex-spouse. The MSA is incorporated into a final Judgement for Dissolution of Marriage that is entered by the Court. MSAs contain agreements between the parties about the division of property, maintenance, and child support. When negotiating and drafting an MSA, parties and their attorney’s must be meticulous and take into consideration that problems with the MSA or unforeseen circumstances could wind up bringing the parties back to Court for an expensive post-decree matter or leave one of the parties unsupported if an unforeseen circumstance, such as the death of their former spouse, arises. The Judgment for Dissolution of Marriage can have lasting effects on the lives of the parties long after it is entered in Court, especially if the agreement creates a support obligation (for either maintenance or child support) which, for some cases, could be permanent.

The law provides that parties receiving maintenance can secure that support through a life insurance policy that names the payee spouse as the beneficiary should the payor spouse die before their support obligation has ended. Such a life insurance policy would give the recipient spouse peace of mind should the payor spouse meet an untimely demise.

In pertinent part, The Illinois Marriage and Dissolution of Marriage Act section 5/504(f) states that “ an award ordered by a court upon entry of a dissolution judgment or upon entry of an award of maintenance following a reservation of maintenance in a dissolution judgment may be reasonably secured, in whole or in part, by life insurance on the payor’s life on terms as to which the parties agree or, if the parties do not agree, on such terms determined by the Court, subject to the following:

(1) With respect to existing life insurance, provided the Court is apprised through evidence, stipulation, or otherwise as to level of death benefits, premium, and other relevant data and makes findings relative thereto, the Court may allocate death benefits, the right to assign death benefits, or the obligation for future premium payments between the parties as it deems just.

(2) To the extent the Court determines that its award should be secured, in whole or in part, by new life insurance on the payor’s life, the Court may only order:

(i) that the payor cooperate on all appropriate steps for the payee to obtain such new life insurance; and

(ii) that the payee, at his or her sole option and expense, may obtain such new life insurance on the payor’s life up to a maximum level of death benefit coverage, or descending death benefit coverage, as is set by the Court, such level not to exceed a reasonable amount in light of the Court’s award, with the payee or the payee’s designee being the beneficiary of such life insurance.

In determining the maximum level of death benefit coverage, the Court shall take into account all relevant facts and circumstances, including the impact on access to life insurance by the maintenance payor. If, in resolving any issues under paragraph (2) of this subsection (f) a court reviews any submitted or proposed application for new insurance on the life of a maintenance payor, the review shall be in camera.

750 ILCS 5/504

Permanent Maintenance awards typically only occur in very long term marriages, but securing even a temporary maintenance award that is limited in amount and duration with a life insurance policy may offer benefits if the payor is in a high-risk job, is elderly, or has serious health problems. It is important to consult a competent attorney if you think that you may be a candidate for maintenance or if securing your existing maintenance award with a life insurance policy is something that interests you.