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Life insurance and divorce

While a couple is discussing property division and considering how their Georgia divorce will affect their finances, one of the topics they may need to include in that conversation is life insurance. According to Protective.com, a policy may be a marital asset that should be divided, if it has a cash value. If not, a person who already owns a policy may want to change the beneficiary, rather than leaving the benefits to a former spouse.

Ameriprise.com points out that sometimes, a judge will rule that a former spouse must be kept on as beneficiary of the policy. This may occur because it ensures that necessary financial support such as alimony will continue after the death of the person who was ordered to pay it. Some may find that keeping an ex-spouse as a beneficiary is preferable to changing the designation to the estate, or to minor children. Whether a parent is paying or receiving child support, making sure the children are cared for is often tied up in the financial health of the other parent, and maintaining that person as the beneficiary is one way to provide after death.

Even if neither spouse has a life insurance policy at the time of the divorce, they may still decide to take out new policies on each other. The premium payments may be tax deductible, as they may count as alimony on federal income tax returns. Spouses who take care of the issue before the divorce is final may also be able to avoid paying gift tax. 

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