In 1st impression case, COA reverses life insurance subsidization as part of equalization payment

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Addressing an issue of first impression, the Court of Appeals of Indiana has reversed an order for a man to subsidize his ex-wife’s life insurance premiums as part of an equalization payment, finding that order violated state statute.

The case of Bradley Cooley v. Shelly Cooley, 22A-DN-1202, began in August 2021, when Shelly Cooley filed for divorce from her now-ex-husband, Bradley.

When the Morgan Superior Court issued its final dissolution decree, the couple’s marital estate was valued at $1.26 million and was divided equally.

Also as part of the dissolution decree, Bradley was awarded his pension but was ordered to make an equalization payment to Shelly of $475,043.29.

However, Bradley doesn’t have sufficient liquid assets to make that payment, and he testified that it was “possible” he would ignore an order to pay Shelly one half of his future retirement benefits to satisfy the payment.

Instead, the trial court ordered Bradley to make payments to Shelly over time. Part of that payment plan included ordering Bradley to obtain a $475,000 life insurance policy that named Shelly as the owner and beneficiary. Shelly would pay the premiums, but those payments would be added to the equalization payment, meaning Bradley would essentially subsidize the premiums.

Bradley challenged the life insurance order on appeal, and in an issue of first impression, the Court of Appeals agreed with his challenge and reversed.

“Here, the trial court’s decree increases the amount of the equalization payment to Wife with every premium payment and thus, in effect, increases the value of the marital estate and the share of the marital estate awarded to Wife beyond the date of the parties’ final separation,” Judge Paul Mathias wrote. “Accordingly, we hold that portion of the decree violates Indiana Code section 31-15-7-4, and we reverse that part of the decree with respect to payment of the life insurance premiums.”

The COA remanded for the trial court to determine, “either by agreement of the parties or by way of submissions or another hearing, the cost of the life insurance premiums in light of Husband’s life expectancy.

“With those factors determined, the trial court shall include the total projected cost of the life insurance policy in the marital estate as security for the marital asset of Husband’s pension and recalculate the equalization payment to Wife so that Wife and Husband share the cost of this security equally.”

Bradley also argued the trial court abused its discretion by failing to consider the tax consequences he would incur when he starts to draw on his pension and pay half of the benefits to Shelly. But the appellate court agreed with Shelly that Bradley had invited any error.

“… (H)usband did not present evidence and can only speculate as to the amount he will owe in taxes on those benefits,” Mathias wrote, citing Hardin v. Hardin, 964 N.E.2d 247, 254 (Ind. Ct. App. 2012). “Accordingly, Husband has not preserved this issue for our review.”

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