Can You Purchase a Life Insurance Policy for an Ex‑Husband Who Owes You Money?

Direct Answer

Yes, you can purchase a life insurance policy that names your ex‑husband as the insured, but you cannot name yourself as the beneficiary if you are not a legally recognized interest holder. Instead, you must use a third‑party (trust, child, or other creditor) or rely on a court‑ordered lien. The process involves consent from the insured, underwriting approval, and often a legal agreement to secure the debt.

Why This Question Arises

Divorced couples sometimes have unresolved financial obligations. A life insurance policy can serve as a way to ensure repayment of a debt—such as alimony, child support, or a personal loan—if the debtor dies before fulfilling the obligation.

Key Legal Principles

Understanding the legal framework is essential before proceeding.

• Consent: The insured (your ex‑husband) must voluntarily apply for coverage and sign the application.
• Insurable Interest: Most states require the policyholder to have an insurable interest in the life of the insured at the time the policy is purchased.
• Beneficiary Restrictions: You cannot be the direct beneficiary unless you have a recognized financial interest (e.g., a court‑ordered judgment).

How to Structure the Policy

1. Third‑Party Beneficiary

Designate a neutral third party—such as a trust, a child, or a corporate entity—to receive the death benefit. You can then enforce the debt through that entity.

2. Court‑Ordered Lien

If a judgment exists, you may request the court to place a lien on the policy's proceeds, ensuring the debt is paid before any other distributions.

3. Assignment of Interest

Some insurers allow you to assign your interest in the policy to a creditor. This requires a written assignment agreement and may affect the policy's tax treatment.

Practical Steps to Obtain the Policy

Follow this checklist to move forward responsibly.

• Confirm the debt is documented with a court judgment or written agreement.
• Discuss the idea with your ex‑husband and obtain his written consent to apply for coverage.
• Choose a reputable insurer and disclose the purpose of the policy.
• Decide on the beneficiary structure (trust, child, lien, or assignment).
• Work with an attorney to draft the necessary legal documents.
• Maintain records of all communications, applications, and agreements.

Potential Obstacles

Several challenges can arise during this process.

Alternative Ways to Secure the Debt

If obtaining a life insurance policy proves impractical, consider these options.

• Secure a promissory note with collateral (e.g., real estate).
• File a lien against the ex‑husband's assets directly.
• Negotiate a structured repayment plan with enforceable penalties.

Tax and Financial Implications

Life insurance proceeds are generally income‑tax free for the beneficiary, but assigning the benefit to a creditor can have different tax consequences. Consult a tax professional to understand potential estate or gift tax issues.

When to Seek Professional Help

Given the legal and financial complexity, professional guidance is advisable in most cases.

• Family law attorney: To confirm the enforceability of the debt judgment.
• Estate planning attorney: To set up trusts or assignments correctly.
• Insurance broker: To locate carriers willing to underwrite the policy.

Summary Checklist

Use this quick reference before committing.

• Documented debt with legal standing.
• Ex‑husband's consent to apply for coverage.
• Clear beneficiary structure that complies with insurable interest laws.
• Legal documents (assignment, lien, trust) prepared.
• Professional advice secured.