Question About Life Insurance
Why should I, the debtor, continue to pay monthly life insurance premiums if when I die my wife the beneficiary who is debt and judgment-free, has the money taken by Uncle Sam?
You raise several good questions. Some of these are investment questions that you should consult a tax attorney about. If you set up life insurance properly, the proceeds will go to your wife outside of your estate. However, this requires following specific rules. If you are the owner of your own policy, there may be an inclusion problem. Even if the proceeds are included in your estate, your wife would not have to pay taxes unless the amount exceeds your available lifetime exclusion.
If the tax is not a problem, then you need to decide if life insurance is a beneficial investment. Finally, this is marked as a divorce question. If you are in fact divorced, you may be required by your divorce decree to provide life insurance to guarantee support payments at your death. Typically life insurance is not ordered unless the parties agree to that provision. You may want to see if she would agree to drop any insurance requirement in divorce mediation.