Tucker says that although some divorce agreements state that a spouse must pay alimony until one of them dies, term life insurance is still probably a better option because most divorced couples have debts or financial concerns that will disappear eventually. For example, by the time you reach retirement age, it's unlikely that your ex-spouse will have to worry about financing a child's college education or paying off a mortgage. If you are the spouse who is receiving alimony and child support payments, and you have an existing policy listing your ex-spouse as your beneficiary, you may still opt to keep the policy in force. If you were to die and your ex-spouse gained custody of the children, he or she would then take on the financial burden of raising the children alone. However, if your ex-spouse has remarried and has two household incomes, or he or she makes enough money to raise the children comfortably on just their own salary, you may decide to contact your insurance company to change your beneficiary.
Many people name their children as the beneficiaries.
However, if your children are under the age of 18, you likely will have to set up a family trust in which a trustee is named to oversee the funds until the children reach a certain age. Rooney notes that family court judges in most states do not view someone under 18 as competent enough to manage a large amount of cash. A trustee may be someone you know, such as a friend or relative, or a professional or an institution, such as a lawyer or a bank. Tucker says you may name your former spouse as the trustee, and keep in mind that he or she is not allowed to spend the money recklessly. If he or she were to spend the life insurance money in any way that was in conflict with the children's best interest, he or she would be subject to court penalties.