Life (Insurance) After Divorce

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Episode Transcript

Hello and welcome back to The Kinder Way Podcast! I’m excited to have a guest on the show with me today – my awesome boss, Angela Ricci! Angela is the VP of Marketing here at Serenia Life, a fellow foodie, and a recent Pickleball enthusiast. Fun Fact: Angela fell in love with riding horses several years ago – and ended up buying one of her own! Now she needs life insurance to make sure her kids can pay for Valentino if she were to die. (Her words – not mine!)

Interestingly, as the mom of two Gen Z daughters, Angela has a firsthand understanding of the financial struggles young adults face today. But we won’t be talking about that in today’s episode. Instead, we’re going to focus on something that personally impacted Angela in the early days of her career: divorce – and the unexpected need for life insurance. Just a note that Angela will be sharing insight based on her own personal experience, and that this episode should not be considered a substitute for legal or financial advice. Always, always consult with a qualified professional for expert guidance that is tailored to your situation.

Welcome to the show, Angela!

And thank you for agreeing to come on here and speak with me about such a personal topic. With about 40% of marriages ending in divorce in Canada, I think it’s safe to say that this is a situation that affects many of our listeners… so let’s get into it!

1. Before you went through your divorce, were you aware that your settlement might require both you and your ex-husband get life insurance?

It definitely caught me by surprise as I believe that it was his lawyer that brought up the topic with my lawyer. I had questions but as I learned more it made sense to me. While I was being asked to purchase a term 10 policy, we also asked him to do the same. This meant that if one of us died in the next 10 years and the other had to raise the children alone, there would be a tax-free cash payout to the parent that now had to cover all of the kids’ expenses. The policy had to be irrevocable – which means that we could not change the beneficiary or anything else with the policy without the written consent of the other parent. This acts as a guarantee that the other parent will be the only person to receive the cash payout on the policy when a parent dies.

2. Can I ask why Term 10 specifically?
Given their ages when we separated, that would cover us both until their early 20’s at which point they would be more independent.

3. Ah, that makes sense. Now that you’ve been through it, can you explain to our listeners why it’s a necessary – I was going to say evil – but, in this case, life insurance really is a necessary good, isn’t it?
Yes, once I understood that it meant that we were both protected if one of us were to die and suddenly had to take on all of the expenses associated with raising 2 children. If the kids lost one of us, the other could possibly pay down a mortgage and free up some of the cash that is used to make mortgage payments or just save the money in a separate account and use it for children’s expenses, possibly help pay for their education, buy them a car or even save it for the kids to use one day to buy their own house. The options are endless but it would give some peace of mind to the parent that is left to raise the children.

4. What about couples who may be leaving the relationship on not-so-friendly terms? I imagine it must be difficult being asked to a pay into a life insurance policy, knowing the payout will go to their ex. Can you tell us why you don’t see this as a bad thing?
I was very fortunate, I had a kind and respectful relationship with my ex-husband but I can certainly see how difficult it would be to make life insurance payments every month or year for a policy that seems to benefit your ex, especially if you didn’t like or trust this person to be responsible with the money and do the best thing for your children. I would explore options with your lawyer to add instructions to your separation agreement that specifies what can and cannot be done with the life insurance proceeds. I don’t know if this is possible, but I would try. In my case, while there are many people that love my children, I know for sure that my ex-husband loves my children as much as I do and I trusted that he would ensure that they benefited directly from a life insurance payout.

5. Are there scenarios where this might not be required – like if a parent has sole custody or is even escaping an abusive situation?

For sure – it all depends on the agreement that you and your ex-spouse come up with. Purchasing life insurance does not have to be part of the agreement.

6. This may seem like a strange question, especially if the kids are still little, but is there an option to leave that money to the child(ren) instead?
It all depends on what you and your ex agree to – you can make the policy irrevocable to your ex or to your child directly if they are over 18. The children are likely under 18, so you may have to assign a trustee if you want your children to receive the money directly.

7. For listeners who may not know what a trustee is, can you explain what it means? And if you had chosen to go this route, who would you have trusted to take on this role… and why?

You can work with your lawyer to set up a trust, as part of that process you will designate a trustee, which means that you will name the person that will be responsible for ensuring that your beneficiaries (in this case your children) receive the money in the trust in the way that you want them to. You can make the trust the beneficiary of your life insurance policy, then you will specify when and how much money you want your children to have and your trustee will make that happen for you.

8. Off the topic of life insurance, but do you have any advice for parents contemplating or going through a divorce?
Every divorce situation is different and every separation agreement is different but here are some of the challenges that I have seen that are definitely worth avoiding. The separation is between 2 adults and the relationship break-down is not the fault of the children, so don’t drag them through a terrible experience. Be respectful to each other and come up with an agreement that is fair and balanced, ensure that the children see you treating each other with kindness and respect. Make their mental health your priority and encourage them to have a great relationship with both parents, support each other as parents, even if you are no longer together. Don’t speak badly about the other parent, as your kids don’t see them the way you do and they could end up resenting you for the things you say about their other parent. I worked with a collaborative lawyer and she was extremely helpful on this front. I feel confident that we set a good example for our kids on how to deal with a difficult situation in a healthy and productive way. Of course this only makes sense if everyone is safe and secure.

And now it’s that time in the show where we sprinkle a little bit of kindness into our listeners’ day. Can you share a time when you witnessed or heard about an act of kindness that moved you?

CONCLUSION

And thank you again, Angela, for taking the time to chat with me today.
Now I know that divorce isn’t really a topic that comes to mind when you think life insurance – but it’s important for parents going through this transition to be in the know about many of the things Angela shared today, so I’m glad we had the chance to shine a light on this topic. I’ve also linked to an article called “Life Insurance After a Divorce ” in the description for anyone who’d like to do further reading.

Well, that’s it for today! Thank you for tuning in to yet another episode of The Kinder Way Podcast. Be sure to tune in next time