What Happens to My Life Insurance in the Event of a Divorce?

What Happens to My Life Insurance in the Event of a Divorce?

By subscribing to a life insurance contract, the consequences linked to the matrimonial regime are often ignored. It is at the time of the divorce that they are revealed. So having a good knowledge of the effects of divorce on the life insurance contract is essential.

What are the consequences of the liquidation of the matrimonial regime on his life insurance? How to protect your life insurance against community sharing? The answer depends on several elements: the matrimonial regime, the origin of the funds used to supply the contract, and the drafting of the beneficiary clause. 

I opened life insurance 5 years ago and I’m getting married soon. How can I protect my life insurance policy in the event of a divorce?

If you take out life insurance on an individual basis, the policy is considered separate property. You then have all the powers to manage your contract. 
However, it is necessary to distinguish the title, that is to say, the property, and the finance, which corresponds to the redemption value of the contract. The title will always be yours. On the other hand, your matrimonial regime will determine the division of the contract between you and your spouse in the event of divorce. 

Marriage under the regime of reduced community of acquests

The regime of community reduced to acquests is that applicable in the absence of a marriage contract.

During the marriage, you can increase the value of your life insurance through payments.

These payments can be made from your own assets or from community funds.

Consequently, at the time of the dissolution of the marriage, the community must be compensated for this personal enrichment ( article 1437 Civil Code ).

It is then necessary to determine the nature of the payments to calculate the reward due to the community.

Payments from equity

  • Money paid before marriage 
  • Money paid after the marriage provided it comes from the sale of own property, a donation, or an inheritance
    Remember to notify the source of your money and their re-use. Otherwise, the money used would be considered common property

► Absence of reward: If all of the payments on the life insurance contract were made from equity, then no reward is due at the time of the divorce.

Payments from mutual funds

In the legal regime, article 1402 of the Civil Code establishes a presumption of community. In the absence of evidence to the contrary, the assets are considered to be acquests: the common asset. Earnings, wages, and income from own property are therefore deemed to be common property.

► Community compensation: When the contract has been funded by common funds (eg salaries), its value is a community asset. This principle was laid down by the Praslicka judgment (Cass. 1st civ. 31-3-1992 n° 90-16.343), which is a case law.

In the event of the dissolution of the community by divorce, the redemption value of the contract must be taken into account in the liquidation operations carried out by the notary. The subscriber spouse, holder of the contract, must indemnify the other spouse up to half of the value of the contract.

It should be noted that the compensation is not based on the total value of the premiums paid, but on the exact value of the contract at the time of the pronunciation of the divorce.

What about contracts funded by own and common funds?

In theory, it would be appropriate to break down the value of the contract according to the different types of payments and surrenders. But reconstructing the history of the contract and its earnings is very complex. To avoid any litigation, the simplest solution is to open two contracts: A contract before the marriage and a contract after the union.

Marriage under the universal community regime with a full attribution clause

Under this matrimonial regime, all the property of both spouses is deemed to belong to the community. The life insurance contract subscribed, even by you alone, is a common good. In the event of liquidation of the conjugal community by divorce, the life insurance contract will be shared equally between you and your ex-spouse.

Marriage under the regime of separation of property

Under the regime of separation of property, there is no community. Your patrimony and that of your spouse are distinct: Each has its own debts, each has its assets, and each has its own management. The contracts are assumed to have been funded with your own funds: Your personal property.

In the event of divorce, the liquidation of the matrimonial regime is simple. There can be no reward since there is no community. Each leaves with its contracts without having to compensate the other.

Note: This rule also applies to Pac’s partners, the principle being the separation of property for contracts concluded since the beginning of 2007.

I have designated my spouse as the beneficiary of my life insurance policy. What happens in the event of a divorce?

Particular attention should be paid to the drafting of the beneficiary clause of your insurance contract, especially in the event of a divorce. It is common for the spouse to be designated as the beneficiary of the contract, for the purpose of protection. Several cases are to be considered.  

Beneficiary clause designating “my spouse”

This general clause may be the subject of litigation in the event of divorce. You, the insured, must update this clause quickly. Indeed, as long as the judgment of divorce has not been pronounced, the spouse retains his status and thus remains beneficiary of the contract if the clause simply states “ my spouse ”. If you were to die before the divorce was pronounced, the capital of the life insurance would be paid to your ex-spouse.

Tip: To limit incidents, it is preferable to enrich the beneficiary clause by specifying “ the spouse of the insured not legally separated or on the condition that divorce proceedings are not declared ”.

Beneficiary clause designating the spouse by name

Naming your spouse as the beneficiary of your life insurance policy can raise a problem in the event of a divorce. The problem stems from the acceptance of the beneficiary.

  • Concerning contracts taken out after January 1, 2005, acceptance by the beneficiary entails the irrevocability of the designation.

You can no longer modify the beneficiary clause of your life insurance once the person initially designated has accepted it.

Consequently, the divorce has no impact on the contracts accepted by your ex-spouse designated as beneficiary.

It should be noted that when a clause specifies both “ my spouse ” and his surname and first name, the insurance company generally considers that the person remains the beneficiary, even if he is no longer the spouse.

  • Concerning the contracts subscribed and accepted before January 1, 2005, the beneficiary clause is freely revocable.  

Tip: In any case, the solution is not to designate the beneficiary by name, but to surround yourself with a specialist to draft your clause and thus avoid unpleasant surprises.

My spouse and we are co-subscribers of a life insurance policy. What will happen in the event of a divorce?

Co-underwriting, or joint underwriting, is a mechanism allowing a married couple to take out a life insurance policy by being both co-subscribers and co-insureds. This co-subscription is reserved for couples married under a communist regime.

In the event of the death of one of the spouses, the surviving spouse will be protected and will benefit from the tax advantages linked to the contract.

In the event of divorce, the contract signed jointly is not closed automatically. The quality of the co-subscriber is not modified. From a practical point of view, this contract cannot continue as it is and will have to be redeemed.

It should be noted that this type of contract must only be fed with common funds under penalty of reclassification as a donation.

Stanley Cole

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