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Replace Survivor Benefit with Life Insurance Policy?


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Over the past ten years I've been helping my disabled mom through a very ugly divorce. While it should be long over, her ex has now popped up and said that he would like her to give up her survivor benefit (he works for the USPS) and in it's place he would get a $25k life insurance policy on himself with her as the beneficary.

I'm assuming this is not in her best interest in any way, and is full of loopholes, but I am trying to figure out as much as I can. I've looked it up and per the QDRO she's entitled to the "maximum survivor annuity benefit based on your Federal service".  

Though also states "the AP is awarded a former spouse survivor annuity under the Federal Employees Retirement System in the same amount as the AP has been receiving or would receive as her share of the P's retirement benefits under paragraph 6a" (she's entitled to 9.6% so he has noted that this pro-rata share would be 55% of $384 (9.6% of his monthly retirement benefit). 

Either way, I'm guessing it's better than a random life insurance policy?

Any advice or feedback? Thank you SO very much. 

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3 hours ago, aupair said:

Over the past ten years I've been helping my disabled mom through a very ugly divorce. While it should be long over, her ex has now popped up and said that he would like her to give up her survivor benefit (he works for the USPS) and in it's place he would get a $25k life insurance policy on himself with her as the beneficary.

I'm assuming this is not in her best interest in any way, and is full of loopholes, but I am trying to figure out as much as I can. I've looked it up and per the QDRO she's entitled to the "maximum survivor annuity benefit based on your Federal service".  

Though also states "the AP is awarded a former spouse survivor annuity under the Federal Employees Retirement System in the same amount as the AP has been receiving or would receive as her share of the P's retirement benefits under paragraph 6a" (she's entitled to 9.6% so he has noted that this pro-rata share would be 55% of $384 (9.6% of his monthly retirement benefit). 

Either way, I'm guessing it's better than a random life insurance policy?

Any advice or feedback? Thank you SO very much. 

Free advice is worth every penny!  Hire an expert who will look at the specifics to determine the answer to your questions.  This is not the venue for a question such as this.

Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFC
President
Qualified Plan Consultants, Inc.
46 Daggett Drive
West Springfield, MA 01089
413-736-2066
larrystarr@qpc-inc.com

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That is in the works, but if this is totally a ridiculous request on his part, then there is probably zero need to even entertain it further, and instead simply answer "thanks but no, we'll be sticking with the original agreement". My mom lives on $800 a month, so if there is no way any smart person would trade a survivor benefit for a life insurance policy, then I probably don't need to spend a dime and can just decline and let him throw yet another temper tantrum. 

Further, this morning I spoke with her divorce attorney from ten years ago, in her eyes there is ZERO benefit to my mom, and her concern on top of that is that at some age he's uninsurable for life insurance. She said she's not a specialist in QDROs, thus is referring us to one, so an attorney has been consulted, one is being contacted, but it sounds like this is so out in left field we can probably just say nope, and move along... thus my posting. My mother has no money to spend, so why spend it if this will never be a "yes, do it" situation?

 

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I'd reject it out of hand and not waste money on an attorney.  It might be actuarially equivalent; we don't know the ages of either party. but unless he can show why it is in her interest to do so, you are under no obligation to consider it.  Also consider that your mom would have to have some way to enforce the maintenance of the policy - who would own it, what happens if he doesn't pay premiums, etc. and the hassle and complication of that alone probably makes it not worthwhile.

Ed Snyder

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  • 2 weeks later...
On 2/13/2020 at 7:57 AM, Bird said:

I'd reject it out of hand and not waste money on an attorney.  It might be actuarially equivalent; we don't know the ages of either party. but unless he can show why it is in her interest to do so, you are under no obligation to consider it.  Also consider that your mom would have to have some way to enforce the maintenance of the policy - who would own it, what happens if he doesn't pay premiums, etc. and the hassle and complication of that alone probably makes it not worthwhile.

Thank you, Ed. That is exactly what my research, and instincts are telling me, and the same concerns I have. We were referred to an attorney who specializes in QDROs, and we are going to meet with him on March 12th, to make sure we fully understand. That said, I highly doubt this is something she would agree to.

We did also want to have the attorney review the QDRO to find out if her ex-husband's threat of never retiring in order to prevent her from getting her share of the retirement, is something he could do successfully. Her divorce attorney believes there is a work around where she could still draw it, even if he does not retire. If so that would likely be proof that karma does exist. Sure, work forever, no sweat off anyone's back but yours. Thank you again, Ed.

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