Divorce at Altitude: A Podcast on Colorado Family Law

Safeguarding Spousal Maintenance with Life Insurance and Beyond | Episode 193

February 26, 2024 Caitlin Geary
Divorce at Altitude: A Podcast on Colorado Family Law
Safeguarding Spousal Maintenance with Life Insurance and Beyond | Episode 193
Show Notes Transcript

Have you ever considered what happens to alimony payments if life throws a curveball? Gain peace of mind as we explore how to ensure alimony or spousal maintenance awards are honored in a Colorado divorce. Our fictitious clients, Eric and Melanie Wolff, serve as a case study, guiding us through the intricacies of life insurance policies and other methods to protect spousal support payments against the unforeseen, such as death or financial instability. 

In this short episode Ryan also gives insights into the legal framework of Colorado law 14-10-114, which governs the security of these payments. We discuss the criteria courts consider when assessing the need for life insurance, including the payer's age, health, and other financial obligations, as well as the cost and the term of maintenance.

What is Divorce at Altitude?

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here. If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.



Ryan Kalamaya:

Welcome to Divorce At Altittude, a podcast on Colorado family law. I'm Ryan Kalamaya. Each week, along with my business partner and co-host, Amy Goscha, or an expert, we discuss a particular topic related to Divorce or co-parenting in Colorado. In addition, we have created a short series of lessons that will take you through the legal process of Divorce and answer your questions from simple to complex. Divorce isn't easy. The end of a marriage, especially when children are involved, brings a great deal of loss and change. We hope these practical tips and insights will help you on your journey to a new. And better life. This is a how-to episode on securing alimony or spousal maintenance awards in a Colorado Divorce. Now, let's assume that we have our hypothetical Divorce clients, Eric and Melanie Wolf, and either by agreement or by court order, Eric has, is going to be paying Melanie$5,000 per month for 10 years. Now if we go into the rationale behind that award, we're gonna get into the lifestyle, the duration of the marriage and all of the factors that I've discussed in previous episodes on what goes into the maintenance award in the first place. But really what we are highlighting is that Melanie is going to continue to be financially reliant in some form on Eric. That raises the issue of what happens if Eric dies the day after the award or a year after the award. And indeed, the law takes into consideration or allows the court and often by agreement of the parties to secure that. Maintenance award that future those future maintenance payments in the form of life insurance. Now, there are other forms of security such as real estate liens. So securing that future payment against real estate that Eric owns there could be a trust that is set up. There could be bank guarantees or lines of credit investment accounts. There's a variety of different ways that. Melanie can protect herself and the parties can reach an agreement, or the court can take into consideration the future payments and making sure that. Those future payments are made. But really what we're going to focus in this episode is life insurance because it is the most common, it's often the least expensive form of securing that future payment. Now, under the law, 14, 10, 1 14, the court's gonna take into con different considerations when. Determining the amount or the terms of the life insurance that secures Eric's payments to Melanie. The court's gonna consider the age and insurability of Eric. The cost of the life insurance the amount and term of the maintenance, whether the parties carried life insurance during the marriage. So if Eric had a life insurance policy during the marriage or currently has one, that's gonna be certainly a factor. The prevailing interest rates at the time of the order, and finally the other obligations of. Eric and so what we're gonna get into is whether or not Eric currently has for example, life insurance and whether that's whole or term life insurance. And really, it's gonna be on a case-by-case scenario. So if Eric has for example, a three-year. Maintenance award, that's gonna be drastically different. The court may not even award security in that circumstance. If Eric is in, good health and he's 40 years old, the court's gonna. Taking into consideration the unlikelihood of him dying and the cost and the mechanics of him obtaining his own separate life insurance award as opposed to Eric is 50 years old and he's got some health issues and there's a ten-year maintenance award. Those health issues that Eric has that might go into the insurability. Of Eric to obtain a life insurance policy in the first place. And again, if he already has a life insurance policy, then the court could order that he provide that Melanie is the beneficiary of that. And we're gonna get into how much he's paying and the extent or the length of that duration. So one common term is, he, you take a net present value of his future payments and then you reduce it by, for example, 70%. And so that if he's got a if we determine that his future maintenance exposure or award is a million dollars, then he would need to make sure that Melanie is provided for up to$700,000. Or rather at least$700,000 as a beneficiary of an existing life insurance policy. Now we can get into some really detailed analysis on this, but really the point is that Eric likely is going to be naming Melanie as a beneficiary under his life insurance policy. Eric oftentimes will come to me and ask why he needs to do that. And the easy answer is that Melanie is going to be dependent in the future on Eric, and needs to make sure that her needs and the rationale that went into the spousal support award in the first place. Are met. But for now, that gives you a high level understanding of securing life insurance or securing maintenance payments in the future with life insurance or some other financial consideration. And thanks for joining us on Divorce at Altitude. Thanks for listening or watching this short lesson on the Divorce Ude podcast. If you found this helpful, please leave a review or share with a friend. It does help for others that are going through or thinking about a Divorce in Colorado. If you want to find out more information, Please visit Kalamaya Law or Divorce at Altittude dot com and that's K A L A M A Y A law. Remember, this is educational information, it's not intended to be legal advice. Please consult with an attorney about the particulars of your case. We're happy to answer questions. Feel free to give us a call at(970) 315-2365.