This is a question about surrendering a life insurance police, but I have a problem.?

I have a dynamic life insurance policy that I was told I could surrender and use for my daughters college fund. The amount is nearly 00. I am the owner of the policy and I am the one who is insured. Here is the problem: I got the papers in the mail that I need to sign and I saw that where the SPOUSE has to sign, it had my ex-husbands name. I called the insurance company and was told that because I bought the policy while I was married to him, it is considered community property (I live in a community property state) he has to sign the paper before I can send it back to the insurance company. Is this right? When we divorced he kept the house and land, his vehicle, his retirement and all his personal property, I got to keep my jeep, my retirement and my personal property. Wouldnt the insurance policy be considered MY PROPERTY? I really dont want to have to give him half when my daughter really needs the money for school.

4 Responses to “This is a question about surrendering a life insurance police, but I have a problem.?”

  1. Steve D Says:

    I am in the insurance and financial services business and have been for many years. If you were my client, here is what I would suggest:

    (1) Unless the life insurance policy was specifically referenced by contract number in your divorce settlement and released to you, it’s most likely that contract is still considered to be community property. "Personal Property" would be things like jewelry, clothing, laptop – things that could easily be identified as yours- not a contract as with the policy. I also suspect that your former spouse was named as primary beneficiary and if that’s the case, you would need his signature to change beneficiary.
    (2) If you don’t want to bring this situation to the attention of your former spouse or don’t believe that you would get his cooperation without a hassle, there is another route you could take. You can call the insurance company and ask for a maximum loan against the policy. Depending upon how long you have owned the policy, you may be able to get 90% or so of the cash value (in your case that would be $6,300). Depending upon how long you have owned the policy, you may have to do this through a combination of loan and withdrawal. The policyowner service people can assist you. You should be able to get that handled right over the phone and have a check in your hands within ten business days.

    Now, you may be thinking "but what about this loan"? "Do I have to pay it back?" A policyowner is NEVER required to pay back a loan. You are simply loaning out your own money. Once you take the loan, you will probably want to stop premium payments (since you were considering surrendering the policy anyway). If you get billed quarterly, semi-annually, or annually you can simply ignore the bills. Eventually the policy will lapse. If you pay through electronic transfer, you will need to ask your insurance company to change the premium mode to annual- then ignore the bills when they arrive. Again, eventually the policy will lapse and that will be the end of the matter.

    Now, there is a caveat! Any time you surrender a life insurance policy where the cash value is larger than the sum of all premiums paid into the contract, you will be required to pay federal income tax on the difference (the gain). If you take a loan against the policy and stop all premium payments, eventually the policy will lapse. In this case, not until but when the policy eventually lapses (which could be several years from now), you will then be required to pay federal income tax on the difference between what you paid into the policy and what you pulled out of the policy (the loan not the cash value). If there is no gain or you get less back than the sum of all premium payments then no taxes will be due.

    Hope that helps?

  2. acermill Says:

    You will need to have your ex-spouse sign the surrender documents which will, of course, educate him on the fact that there is cash here.

    You are best advised to speak to your ex-spouse, explaining why you are surrendering the policy and what the proceeds are to be used for. With good luck, he will understand and sign off for your daughter’s education. If he’s a real jerk, he can demand half of the accrued cash value, according to law.

  3. busted Says:

    presumably this was addressed in court. if not you should talk to your lawyer. the initial consult should be free for this problem. unless you have a good relationship with your ex then maby since it is for his child he will be gracious. if not sue him for half of your mutual child’s education.

  4. mbrcatz17 Says:

    Well, in community property states, ANYTHING you buy while married belongs to both of you.

    But it should have been declared an asset during the divorce, and the judge should have assigned it. So I’m going to say, contact the attorney who handled your divorce, and ask them.