15850 W. Bluemound Rd. Suite 304 • Brookfield, WI 53005

15850 W. Bluemound Rd. Suite 304 • Brookfield, WI 53005 • 262-788-5335

Planning for Your Insurance Policy During Divorce

As a parent going through a divorce, you will have to make countless decisions regarding child custody and how you will raise your kids.

While you are negotiating matters such as child support and time-sharing, you may also be thinking about your children’s future if you or your ex were to pass away. While you may have relied on a life insurance policy to provide for your kids previously, without careful planning, you could lose this security.

a couple planning insurance policy during divorce

A recent case demonstrates some of the issues that can come up concerning life insurance and divorce.

Joan Pulkkila v. James Pulkkila

In 2009, Joan Pulkkila and James Pulkkila entered into a binding agreement during their divorce that James would maintain a $250,000 life insurance policy that named the couple’s two children as the only beneficiaries until they became adults. The agreement also said that if James failed to keep up this policy, the children would have a lien against his estate up to the insurance amount.

However, in 2014, James changed the policy and named his new wife as the sole beneficiary of the insurance proceeds. When he died a year later, the new wife got all of the money. At the time of their father’s death, the children were teenagers, and his estate was worth about $5600. 

Joan Pulkkila raised the issue in Waukesha County Circuit Court and asked the judge to order that the funds be given back to the children as the divorce agreement required. 

The judge denied her request and ruled that the only remedy was to get the money from the estate. Joan appealed this decision to the Court of Appeals and the 2:1 majority ruled in her favor noting “Wisconsin’s strong public policy in favor of properly supporting the children of a dissolving marriage.” The court also indicated that if James had left $250,000 in his estate, rather than only $5600, the result might have been equitable. As the change unjustly deprived the children of the funds meant for their care and the estate could not make up the difference, the court found the case in Joan’s favor. 

Although the ruling seems fair and compassionate, the dissenting judge thought that the original opinion was legally correct and that the appellate court should have held the parties to the original terms of their agreement even if it meant leaving little for the children. Furthermore, while Joan may have achieved a victory at the appellate level, the case may not be over as the opposing side has requested a review with the Wisconsin Supreme Court. As this decision reveals, planning for your children’s future support can be complicated, and there can be unexpected issues down the road.