Life Insurance

In a recent matrimonial case that I handled, I was surprised to hear that the judge presiding over the case did not believe it was necessary for the custodial parent to maintain some form of life insurance for the benefit of the parties' minor child, as was being required of the non-custodial parent. I was so convinced that this could not be the normal practice of our trial judges that I researched relevant statutory authority and case law. However, this judge apparently is not alone. I could not find any reported cases in which a custodial parent was directed to maintain a life insurance policy for his or her child. (There are cases that refer to policies voluntarily maintained by custodial parents, such as Jennifer H.S. v. Damien P.C., 50 AD3d 588 (1st Dept. 2008), in which a trial court's decision not to require the custodial parent to maintain life insurance for his children in excess of what he voluntarily maintained was affirmed.)

This seems to be an unfair and incongruous result given the language and calculations of the Child Support Standards Act, which clearly and unquestionably considers the income of both parents, and assigns a pro rata share of the basic child support obligation to each parent, not just the non-custodial parent. Domestic Relations Law (DRL) ' 240. Why, then, not take the next logical step of requiring both parents to maintain life insurance for the benefit of their child as security for their respective child support obligations which they each, by statute, have?

Life Insurance Under the Domestic Relations Law

DRL ' 236(B)(8)(a) authorizes the court in a matrimonial action to order a party to purchase, maintain, or assign a policy of insurance on the life of either spouse and to designate either spouse or children of the marriage as irrevocable beneficiaries during a period of time fixed by the court. However, the interest of the beneficiary must cease upon the termination of the insured party's obligation to provide maintenance, child support or a distributive award, or when the beneficiary remarries or predeceases the insured. Essentially, the statute authorizes the court to provide for life insurance as a device to secure the payment of maintenance, child support or a distributive award in the event of the death of the payor spouse prior to those financial obligations being satisfied. Hartog v. Hartog, 85 NY2d 36 (1995); Recuppio v. Recuppio, 246 AD2d 342 (1st Dept. 1998); Friedman v. Friedman, 216 AD2d 204 (1st Dept. 1995).

The question of whether or not a party must maintain life insurance for the benefit of his or her spouse or children is left solely to the discretion of the court. J.A. v. S.A., 4 AD3d 248 (1st Dept. 2004). Thus, there is no requirement that a party maintain life insurance for his or her spouse or child and courts have, at times, exercised the discretion to dispense with any need for a life insurance policy ' for example, when the payor spouse was “uncontestedly uninsurable” (Hartog v. Hartog, Id. at endnote 5); on a pendente lite basis, when the payor spouse's “financial abilities were presently unclear” (V.Z.V v. K.P.V., 28 Misc.3d 1215(A) (Sup. Ct., Queens Cty., 2010) (Siegal, J)); or when neither party requested the maintenance of life insurance policies. (G.K. v. L.K., 27 Misc.3d 1239(A), (Sup. Ct., Kings Cty., 2010) (Sunshine, J.)).

However, one court has gone so far as to require an 80-year-old husband to “take all necessary steps to obtain life insurance coverage of $1 million” for the benefit of his wife. Merrick v. Merrick, 154 Misc.2d 559 (Sup. Ct., NY Cty., 1992) (Saxe, J.). (There is no indication of what would happen if the husband in Merrick, after taking “all necessary steps” to obtain the required life insurance, was unable to do so. In addition, in this particular case, the husband had previously defaulted on his support obligations on several occasions, resulting in enforcement motions, money judgments for arrears, the posting of $250,000 as security for his court-ordered payments, and the sequestration of funds with the wife appointed as a receiver. Therefore, perhaps the husband's clear disdain for and disregard for his court-ordered obligations led to the imposition of the obligation to obtain a life insurance policy in spite of his age.)

Most courts appear to lean in favor of requiring the maintenance of a life insurance policy where a party has ongoing financial obligations to his or her spouse or children. See, e.g., Wilbur v. Wilbur, 116 AD2d 953 (3rd Dept. 1986), (case remitted to the trial court because it was “unclear” the trial court knew it had authority to grant the wife's request that the husband be required to maintain a life insurance policy for her benefit). See also Lee v. Lee, 18 AD 3d 508 (2nd Dept. 2005); Corsel v. Corsel, 204 AD2d 1076 (4th Dept. 1994); Bofford v. Bofford, 117 AD2d 643 (2nd Dept. 1986).

Why then, as a matter of course, would a court not require a custodial parent to maintain life insurance for the benefit of his or her child?

Comparisons to CSSA Pro Rata Obligations

Given that the Child Support Standards Act allocates a portion of the basic child support obligation to both parents, clearly the custodial parent does shoulder a part of the child support burden (some might argue the greater part), and unquestionably contributes substantially to the support of the children. This is particularly true when the custodial parent is a wage-earner and has been allocated his or her pro-rata responsibility to contribute to the child's unreimbursed medical, child care and/or educational expenses. Were the custodial parent to die without any life insurance policy in place for the benefit of the child, the entire burden of paying for the child's total expenses, including unreimbursed medical, child care and educational expenses, would fall squarely on the shoulders of the former non-custodial parent. That parent has now, in all likelihood, been thrust into the position of custodial (and only) parent, with 100% of the financial responsibility for the child, and without the benefit of any life insurance proceeds from the deceased parent. The inequity, for both the child and the non-custodial parent, seems obvious. Yet the dearth of reported cases in which a custodial parent was directed to maintain life insurance for the benefit of his or her child indicates that the courts apparently do not see the inherent unfairness in failing to order the custodial parent to maintain a life insurance policy.

Practical Issues and Effects

Consider the following scenario: The mother, who is the custodial parent, is a high-powered partner at a venerable Manhattan law firm, earning in excess of $1 million a year. The father, the non-custodial parent, is a high school English teacher in a public school in Manhattan, earning $85,000 a year. The child attends private school in Manhattan, paid for by the mother from her earnings, without contribution from the father. The father pays child support in accordance with the Child Support Standards Act, as well as 10% of the child's unreimbursed medical expenses, and child care expenses pursuant to a decision after trial.

The father, as the non-custodial parent, was directed by the trial court to maintain an insurance policy on his life for the benefit of the child to secure his child support obligations. Given the father's income, his income tax obligations, his child support obligations, the cost of continuing to live in Manhattan after the divorce so that he can maintain a relationship with the child, and his own basic living expenses, it is difficult for him to pay even the nominal cost of term life insurance. On the other hand, the mother, as the custodial parent, was not directed to maintain any insurance on her life. This despite the fact that she contributes far more to the support of the child, including by paying the child's private school tuition and 90% of the unreimbursed medical expenses and child care expenses.

Were the mother to die without any life insurance for the benefit of the child, the father would unquestionably be unable to maintain any semblance of the child's former life. Without the mother's continued financial contributions or any life insurance proceeds, the father would not be able to keep the child in private school, would not be able to pay for continued child care and would likely not be able to remain in Manhattan. The child's entire life would be dramatically and, no doubt, traumatically, changed.

Perhaps this scenario is extreme. Perhaps the mother voluntarily maintains a life insurance policy or her estate is substantial enough to provide financial security for the child. Even so, the estate could be tied up in legal proceedings for years following the mother's death, leaving nothing available for the support of the child; or the estate could be substantially reduced or completely gone at the time of the mother's death, again leaving nothing available for the support of the child. Theoretically, the mother could have left her estate to someone other than the child as there is no requirement for her to bequeath anything to the child.

Considering the Children's Needs

Courts' apparent failure, whether intentional or not, to require a custodial parent to maintain life insurance for the benefit of the children seems inexplicable. Surely, the legislature and the courts cannot have intended to confer an obligation on a custodial parent to contribute to the support of his or her child during life, as the Child Support Standards Act requires, but to dispense with that obligation upon death, as the case law addressing DRL ' 236(B)(8)(a) appears to indicate. However, in the absence of a court direction to a custodial parent to maintain life insurance, that is exactly what will often happen.

One can only hope that, despite the complete lack of reported cases addressing the obligation (if any) for custodial parents to maintain life insurance policies for their children, courts are issuing such directions in unreported decisions and/or most litigants and attorneys are including such provisions in their Separation Agreements or Stipulations of Settlement. However, for the protection of children, the bench and bar alike should give consideration to this important issue.

Jennifer Rosenkrantz is a partner at Schlissel Ostrow Karabatos, PLLC in Garden City. She may be reached at [email protected].

In a recent matrimonial case that I handled, I was surprised to hear that the judge presiding over the case did not believe it was necessary for the custodial parent to maintain some form of life insurance for the benefit of the parties' minor child, as was being required of the non-custodial parent. I was so convinced that this could not be the normal practice of our trial judges that I researched relevant statutory authority and case law. However, this judge apparently is not alone. I could not find any reported cases in which a custodial parent was directed to maintain a life insurance policy for his or her child. (There are cases that refer to policies voluntarily maintained by custodial parents, such as Jennifer H.S. v. Damien P.C. , 50 AD3d 588 (1st Dept. 2008), in which a trial court's decision not to require the custodial parent to maintain life insurance for his children in excess of what he voluntarily maintained was affirmed.)

This seems to be an unfair and incongruous result given the language and calculations of the Child Support Standards Act, which clearly and unquestionably considers the income of both parents, and assigns a pro rata share of the basic child support obligation to each parent, not just the non-custodial parent. Domestic Relations Law (DRL) ' 240. Why, then, not take the next logical step of requiring both parents to maintain life insurance for the benefit of their child as security for their respective child support obligations which they each, by statute, have?

Life Insurance Under the Domestic Relations Law

DRL ' 236(B)(8)(a) authorizes the court in a matrimonial action to order a party to purchase, maintain, or assign a policy of insurance on the life of either spouse and to designate either spouse or children of the marriage as irrevocable beneficiaries during a period of time fixed by the court. However, the interest of the beneficiary must cease upon the termination of the insured party's obligation to provide maintenance, child support or a distributive award, or when the beneficiary remarries or predeceases the insured. Essentially, the statute authorizes the court to provide for life insurance as a device to secure the payment of maintenance, child support or a distributive award in the event of the death of the payor spouse prior to those financial obligations being satisfied. Hartog v. Hartog , 85 NY2d 36 (1995); Recuppio v. Recuppio , 246 AD2d 342 (1st Dept. 1998); Friedman v. Friedman , 216 AD2d 204 (1st Dept. 1995).

The question of whether or not a party must maintain life insurance for the benefit of his or her spouse or children is left solely to the discretion of the court. J.A. v. S.A. , 4 AD3d 248 (1st Dept. 2004). Thus, there is no requirement that a party maintain life insurance for his or her spouse or child and courts have, at times, exercised the discretion to dispense with any need for a life insurance policy ' for example, when the payor spouse was “uncontestedly uninsurable” (Hartog v. Hartog , Id . at endnote 5); on a pendente lite basis, when the payor spouse's “financial abilities were presently unclear” ( V.Z.V v. K.P.V. , 28 Misc.3d 1215(A) (Sup. Ct., Queens Cty., 2010) (Siegal, J)); or when neither party requested the maintenance of life insurance policies. ( G.K. v. L.K. , 27 Misc.3d 1239(A), (Sup. Ct., Kings Cty., 2010) (Sunshine, J.)).

However, one court has gone so far as to require an 80-year-old husband to “take all necessary steps to obtain life insurance coverage of $1 million” for the benefit of his wife. Merrick v. Merrick , 154 Misc.2d 559 (Sup. Ct., NY Cty., 1992) (Saxe, J.). (There is no indication of what would happen if the husband in Merrick , after taking “all necessary steps” to obtain the required life insurance, was unable to do so. In addition, in this particular case, the husband had previously defaulted on his support obligations on several occasions, resulting in enforcement motions, money judgments for arrears, the posting of $250,000 as security for his court-ordered payments, and the sequestration of funds with the wife appointed as a receiver. Therefore, perhaps the husband's clear disdain for and disregard for his court-ordered obligations led to the imposition of the obligation to obtain a life insurance policy in spite of his age.)

Most courts appear to lean in favor of requiring the maintenance of a life insurance policy where a party has ongoing financial obligations to his or her spouse or children. See, e.g., Wilbur v. Wilbur , 116 AD2d 953 (3rd Dept. 1986), (case remitted to the trial court because it was “unclear” the trial court knew it had authority to grant the wife's request that the husband be required to maintain a life insurance policy for her benefit). See also Lee v. Lee , 18 AD 3d 508 (2nd Dept. 2005); Corsel v. Corsel , 204 AD2d 1076 (4th Dept. 1994); Bofford v. Bofford , 117 AD2d 643 (2nd Dept. 1986).

Why then, as a matter of course, would a court not require a custodial parent to maintain life insurance for the benefit of his or her child?

Comparisons to CSSA Pro Rata Obligations

Given that the Child Support Standards Act allocates a portion of the basic child support obligation to both parents, clearly the custodial parent does shoulder a part of the child support burden (some might argue the greater part), and unquestionably contributes substantially to the support of the children. This is particularly true when the custodial parent is a wage-earner and has been allocated his or her pro-rata responsibility to contribute to the child's unreimbursed medical, child care and/or educational expenses. Were the custodial parent to die without any life insurance policy in place for the benefit of the child, the entire burden of paying for the child's total expenses, including unreimbursed medical, child care and educational expenses, would fall squarely on the shoulders of the former non-custodial parent. That parent has now, in all likelihood, been thrust into the position of custodial (and only) parent, with 100% of the financial responsibility for the child, and without the benefit of any life insurance proceeds from the deceased parent. The inequity, for both the child and the non-custodial parent, seems obvious. Yet the dearth of reported cases in which a custodial parent was directed to maintain life insurance for the benefit of his or her child indicates that the courts apparently do not see the inherent unfairness in failing to order the custodial parent to maintain a life insurance policy.

Practical Issues and Effects

Consider the following scenario: The mother, who is the custodial parent, is a high-powered partner at a venerable Manhattan law firm, earning in excess of $1 million a year. The father, the non-custodial parent, is a high school English teacher in a public school in Manhattan, earning $85,000 a year. The child attends private school in Manhattan, paid for by the mother from her earnings, without contribution from the father. The father pays child support in accordance with the Child Support Standards Act, as well as 10% of the child's unreimbursed medical expenses, and child care expenses pursuant to a decision after trial.

The father, as the non-custodial parent, was directed by the trial court to maintain an insurance policy on his life for the benefit of the child to secure his child support obligations. Given the father's income, his income tax obligations, his child support obligations, the cost of continuing to live in Manhattan after the divorce so that he can maintain a relationship with the child, and his own basic living expenses, it is difficult for him to pay even the nominal cost of term life insurance. On the other hand, the mother, as the custodial parent, was not directed to maintain any insurance on her life. This despite the fact that she contributes far more to the support of the child, including by paying the child's private school tuition and 90% of the unreimbursed medical expenses and child care expenses.

Were the mother to die without any life insurance for the benefit of the child, the father would unquestionably be unable to maintain any semblance of the child's former life. Without the mother's continued financial contributions or any life insurance proceeds, the father would not be able to keep the child in private school, would not be able to pay for continued child care and would likely not be able to remain in Manhattan. The child's entire life would be dramatically and, no doubt, traumatically, changed.

Perhaps this scenario is extreme. Perhaps the mother voluntarily maintains a life insurance policy or her estate is substantial enough to provide financial security for the child. Even so, the estate could be tied up in legal proceedings for years following the mother's death, leaving nothing available for the support of the child; or the estate could be substantially reduced or completely gone at the time of the mother's death, again leaving nothing available for the support of the child. Theoretically, the mother could have left her estate to someone other than the child as there is no requirement for her to bequeath anything to the child.

Considering the Children's Needs

Courts' apparent failure, whether intentional or not, to require a custodial parent to maintain life insurance for the benefit of the children seems inexplicable. Surely, the legislature and the courts cannot have intended to confer an obligation on a custodial parent to contribute to the support of his or her child during life, as the Child Support Standards Act requires, but to dispense with that obligation upon death, as the case law addressing DRL ' 236(B)(8)(a) appears to indicate. However, in the absence of a court direction to a custodial parent to maintain life insurance, that is exactly what will often happen.

One can only hope that, despite the complete lack of reported cases addressing the obligation (if any) for custodial parents to maintain life insurance policies for their children, courts are issuing such directions in unreported decisions and/or most litigants and attorneys are including such provisions in their Separation Agreements or Stipulations of Settlement. However, for the protection of children, the bench and bar alike should give consideration to this important issue.

Jennifer Rosenkrantz is a partner at Schlissel Ostrow Karabatos, PLLC in Garden City. She may be reached at [email protected].