A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Car Insurance Agent Daniel Walker

UPDATED: May 12, 2022

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Don't miss these facts...

  • Child support is paid to a custodial parent for the sole purpose of providing for the children in a divorce in the same manner as was being done before the divorce occurred
  • If a noncustodial parent fails to live up to the order set by the divorce court, there are severe measures that can be taken to be sure that the obligation is met, including garnishing of wages, liens on property and bank accounts, and jail time
  • Death benefit proceeds from life insurance are protected from creditors in most cases where there is a named beneficiary
  • Not all states are so absolute with the exclusion of creditors from death benefit proceeds, and it is a good idea to get legal advice on the matter

In a divorce situation, the awarding of a child support decree to an ex-wife for the support of the children is a serious order.

The ex-husband is bound to provide the sum of money ordered by the court because essentially that was what was being provided for the children’s care when the marriage was intact.

If such an order is prescribed by the divorce court and the father, presumably, who is to live up to that order, fails to do so, he will be in serious trouble. 

There are enforcement and collection measures that can be taken from a Federal standpoint that includes wage garnishment, liens against the property of the parent obliged to pay the support, the freezing of bank accounts, suspension of the payor’s driver’s license, and jail time if the situation becomes serious enough.

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Life Insurance

In many instances, if there is no life insurance in effect on the life of the payor of the child support, the court will strongly suggest, or require the noncustodial parent to purchase life insurance in the amount which will provide the amount of child support required. Life insurance and child support are separate.

Some states allow a judge to require the purchase of life insurance, others not, but it can be strongly suggested.

There may already be life insurance in effect on the life of the payor, and if that is maintained, then the court will not require any further coverage.

The task of the divorce court is to act on behalf of the children involved and to see to it that their lives are unaffected from a financial standpoint as much as possible.

The laws in most states decree that if a dad who owes child support dies, his estate will still owe the money. This is why it makes sense for a court to order or strongly suggest life insurance to cover the situation.

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Can life insurance death benefits be attached for childcare?

In most states, the proceeds of life insurance that go to a named beneficiary are exempt from the claims of creditors.

The reasoning is that life insurance is basically for the protection of widows and orphans, and having those proceeds subject to the claims of creditors would circumvent the original intent.

However, there are always exceptions, and from state-to-state, there are all kinds of permutations of that concept.

One argument that is often used is that in many cases the creditors of the insured who just died are also the creditors of the beneficiary. This is commonly the case with marital debts, as they are created jointly in many instances.

Bob and Mary get a divorce which results in Bob being directed by the court to pay child support. Bob subsequently marries Alice. Bob purchases a $500,000 life insurance making Alice the beneficiary. Bob then dies.

The question is then, can the court that issued the order for the child support make a claim against the $500,000 payable to Alice?

In most states, the answer would be no because this is not Alice’s debt. If Alice were to be a co-debtor on the child support, it might be a different matter.

Proper Planning is a Good Thing

A divorce situation is not something that most people take lightly because it involves issues that cut deep and are sometimes very difficult to deal with and resolve.

It is a rare instance when the noncustodial parent doesn’t wish the best for his or her children.

Making sure that life insurance is in place for the welfare and benefit of the children is an important part of making certain that they are cared for, and even a term life policy to that end is a desirable end.

The simple thing to do is make the custodial parent the beneficiary of the policy, or a trust that is set up specifically for the purpose of providing money for child support in case the custodial parent somehow becomes unable to function.

Unfortunately, not all parents think things through rationally, and some things just do not get properly done.

In instances where a debt is considered to be a jointly held debt, the life insurance proceeds to a spouse, for example, could still be exempt from creditors, once again depending on the state of domicile.

This follows along with the concept that life insurance proceeds are for the protection of beneficiaries and are not subject to creditors.

There are instances, even in states where this is a precedent, where creditors will attempt to attach liens against the bank accounts of beneficiaries if they know about such a life insurance pay off.

But that is a problem for creditors because life insurance companies are under no obligation to notify creditors of any information about anyone’s life coverage, when and how a death benefit will be paid, or any other information regarding other details.

The best a creditor could do is watch the obituaries and attach the bank accounts of the beneficiary of the beneficiary.

Keep the Money in the House

Each situation is different and has varying circumstances to be sure, but imagine a noncustodial spouse who feels that the child support is provided for, yet still, wants to keep the ex-spouse out of his financial affairs.

Assume that Bob in our previous example remarries a lady named Alice and that he buys the $500,000 life insurance policy and names Alice as the primary beneficiary.

Bob could establish a spendthrift trust which would limit income to Alice until the time the children of the first marriage reach age 18.

The life insurance can make the trust the beneficiary, which will have language prohibiting the payment of any of the creditors of Bob or Alice, which would prohibit the trust from making any distributions of principal to creditors of either Bob or Alice.

The key question as far as how far courts can go in appropriating life insurance proceeds, and sometimes the answer is “as far as they can get.”

Once again, legal interpretations vary, but if the named beneficiary is the estate, then it is a sure fire thing that the money will go to pay the childcare.

The personal representative for the estate is bound legally to notify all creditors of funds to satisfy their claims, so that would end that.

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In Conclusion

In general, the debts of an insured person is not subject to the claims of creditors, because it would thwart the intent of life insurance which is to provide for dependents with the replacement of lost income and security because of the death of the insured. Be sure to have life insurance and child support prepared properly.

This rule does vary from state to state, and it would behoove anyone to check with an attorney just to verify how this would affect anyone with childcare obligations.

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