Change in Virginia Family Law Regarding Life Insurance
A new law goes into effect in Virginia on July 1, 2017, giving courts the authority to order a party paying spousal support to maintain an existing life insurance policy for the benefit of the payee spouse. This change to Virginia family law will come from a new statutory provision, Va. Code § 20-107.1:1.
The existing life insurance policies must be on the payor spouse’s life, not the payee spouse’s life. Additionally, the policy must have been issued during the marriage, through the insured’s employment, or be within effective control of the insured provided that the insured party has the right to designate a beneficiary during the marriage and the payee is a party with an insurable interest.
This new Virginia code provision effectively overrules the holding under Lapidus v. Lapidus, 226 Va. 575 (1984). In Lapidus, the Supreme Court held that nothing in the divorce statutes empowered Virginia courts to order that a party maintain or contract for life insurance policies for the benefit of the other party. This new legislation reflects the Commonwealth’s public policy concern of ensuring that an ex-spouse receiving spousal support has financial protection in the event of the payor’s death.
How the application and enforcement Va. Code § 20-107.1:1 plays out in the courts is left to be determined, but there are some general concepts that practitioners and parties must consider in a divorce action on or after July 1, 2017. They are:
- The statute grants the court the discretion to determine whether or not to order a party to maintain any existing life insurance policies if that party is obligated to pay spousal support. The court is not mandated or required to order that any existing life insurance policies must be kept in place.
- In making its determination, the court must consider a list of seven enumerated factors, which are: (i) the age, health, and insurability of the insured party; (ii) the age and health of the payee spouse; (iii) the cost of the life insurance policy; (iv) the amount and term of the award of the spousal support; (v) the prevailing insurance rates at the time of the order; (vi) the ability of either spouse to pay the premium cost of the life insurance; and (vii) such other factors as the court deems necessary or appropriate to consider in order to arrive at a fair order.
- The statute only permits a court to order a party paying support to maintain a life insurance policy that was in existence during the marriage. A court still does not have the statutory authority to order a party to obtain a new life insurance policy for the benefit of the other spouse (per the holding in Lapidus).
- As noted above, the existing life insurance policy must also be on the payor spouse’s life, not the payee spouse’s life, for Va. Code § 20-107.1:1 to be applicable. Thus, if the parties only had life insurance policies on the payee spouse’s life, the court would not have the authority under Va. Code § 20-107.1:1 to order that such policies be maintained.
- The court may allocate the cost of the premiums between the parties. This means that the payor or payee spouse may be ordered to pay all of the premiums or that the parties each pay a percentage of the premiums.
- The obligation to maintain the life insurance policies ceases upon the payor spouse’s obligation to pay spousal support being terminated, unless the ground to terminate is based upon the payee living in a relationship analogous to marriage pursuant to Va. Code §20-107.1.
- The court may order that the payee spouse be designated as beneficiary of “all or a portion” of the life insurance policy.
- The court also has the authority to order the payor spouse to execute all appropriate forms or written consents to require the insurance company to provide information to the payee spouse to the extent required by the court’s order.
- If spousal support is not ordered by the court, but a court grants the payee spouse a reservation to seek spousal support in the future, Va. Code § 20-107.1:1 is inapplicable. Va. Code § 20-107.1:1 is applicable only if an actual award of spousal support is ordered.
- Any court order to maintain life insurance may be modified based upon a material change of circumstances, considering the seven factors enumerated above. A material change of circumstances may include the payor spouse’s remarriage.
- If the payor spouse’s employment-provided life insurance policy is terminated or cancelled by the employer or there is an involuntary change in the payor spouse’s employment status (layoff) that causes the policy to no longer be in effect or in existence, then such circumstances shall not be the basis for holding the payor in contempt. The assumption is that these circumstances were not controllable by the payor spouse.
- The court does not have the authority to impose an obligation on the payor spouse to pay for a term life insurance policy to be converted to a permanent life insurance policy if such an option exists.
- The language of Va. Code § 20-107.1:1 implies that the intent of this statute is for it to be inapplicable to divorce actions filed prior to July 1, 2017. This means that Va. Code § 20-107.1:1 is not retroactive to current cases or cases determined prior to July 1, 2017.
If you may be paying or receiving spousal support, be sure to discuss this change in Virginia law with a family law attorney in your jurisdiction. The family lawyers at Livesay & Myers, P.C. have years of experience with spousal support matters in courts across Northern Virginia. Contact us to schedule a consultation today.