Life Insurance Question

[spangle1033]

All parties live in GA.

I am the Stepmother.  DH will be paying child support on one child for 10 more years, and on another child for 12 more years.

Currently, I have one biological child and carry a large life insurance on myself.  The majority of this life insurance is meant for my biological child (education, care, etc.) in case of my death.

At this point, DH is named on my life insurance to receive 100% of the proceeds in the event of my death.

Recently, I have become worried that his Ex-Wife could claim this money, if I died, as DH's income and make an attempt to get a portion of it.

1.  If I were to die and DH were to receive 100% of the policy, could his Ex-Wife make a claim for a portion of it by having it considered as income?

2.  If the answer to Question 1 is YES, should the recepient of the policy be an immediate relative of mine who I trust (my mother) who would give a portion of it to DH and place the remainder in trust for my child, or should it be put in my child's name with my DH as trustee?

3.  While I'm on the subject, in my situation if I took control of a pre-established business (given to me as a gift), could DH's Ex-Wife attempt to claim a portion of the profits, even if DH is in no way associated with the business?

4.  Finally, do you suggest separate accounts in this type of situation?

Thanks SOC!!

[socrateaser]

>1.  If I were to die and DH were to receive 100% of the
>policy, could his Ex-Wife make a claim for a portion of it by
>having it considered as income?

It's a possibility. Extremely remote -- but, possible.

>2.  If the answer to Question 1 is YES, should the recepient
>of the policy be an immediate relative of mine who I trust (my
>mother) who would give a portion of it to DH and place the
>remainder in trust for my child, or should it be put in my
>child's name with my DH as trustee?

Establishing a trust with child as beneficiary and DH as trustee, and then designating the trust to receive the insurance proceeds, by naming the trust as beneficiary in the insurance documents, would keep the money out of probate, and prevent ex-spouse from alleging that the money is income to DH.

>3.  While I'm on the subject, in my situation if I took
>control of a pre-established business (given to me as a gift),
>could DH's Ex-Wife attempt to claim a portion of the profits,
>even if DH is in no way associated with the business?

GA is a separate property jurisdiction, so the business and its income is yours. However, if DH has unrestricted access to the proceeds of the business, because, for example, you deposit distributions and earnings into a joint account, then the ex could argue that the business is merely an artifice to avoid having child support calculated on the income thereby generated.

So, don't commingle any money from the business, and don't give your DH any withdrawal authority over any account where earnings or distributions are deposited, don't issue any stock certificates in the business to your DH, don't enter into any written partnership agreement with DH, don't permit DH any management or control over the business, etc.

If you do any of the above, a smart lawyer will figure out how to pierce the veil and have the court calculate child support based on the business income.

>4.  Finally, do you suggest separate accounts in this type of
>situation?

I suggest not getting married, but as you already are, I suggest that you file tax returns as "married filing separately," and that you keep every cent of your income distinctly and physically separate from your DH, and that you don't take joint title to any assets (real or personal property, stocks, bonds, cds, etc.).