#The Moneyist: My former mother-in-law took out a life-insurance policy on my eldest child. I’m enraged. Is that legal?

My ex-husband is an alcoholic, and has a very controlling and manipulative mother. He is currently on probation and not allowed to drive, after five DUIs. My ex-husband is a momma’s boy. His mother is a dishonest and conniving individual who will beg, borrow, cheat and steal for her “baby boy” or herself, because she feels the world owes her.  

When I remarried, I was in a court battle with my ex — or his mom, because she controlled the purse strings — off and on for about four years. My ex was trying to get out of paying child support. I finally agreed to it, as I was tired of the fight. Besides, my current husband said that if the ex didn’t want to take care of his own child, he would. 

We still continued to battle over ridiculous things throughout the years. Not once did my ex-husband or his parents help with anything financially other than what was required by the court, which was nearly nothing. They didn’t help with anything school-related unless required; they didn’t help with the purchase of the first car, college tuition and fees.

They didn’t even help when my oldest asked to go to alcohol rehab because she needed help. I haven’t communicated with any of them in over 10 years. I despise all of them. Fast-forward to today, when my oldest told me that my former mother-in-law has a life-insurance policy on all her grandkids, plus half a dozen other people.  

They have never given or even offered financial help throughout the years for anything for my daughter, so why does she think it’s OK to have a life-insurance policy on my child? How can I cancel this policy? I can assure you she plans on pocketing the money instead of helping to bury my child if — God forbid — my daughter passes away.

She is a monster-in-law! Any information or advice would be greatly appreciated.

Former Daughter-in-Law

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Dear Former,

Generally, taking out a life-insurance policy on a grandchild makes sense as a gift for that child, rather than as a payout for the person who took out the policy.

In most states, your former mother-in-law would need permission from your daughter, assuming she was an adult at the time, or from her parent or guardian if she was a minor. Presumably, she sought such permission from your daughter’s father. Forging such a signature would be illegal. 

Of course, most grandparents take out policies on their grandchildren to help them build up a nest egg for college — even if a 529 account would be a better alternative — or merely as a way to gift them money at a later date. They may, for instance, sign over the policy to them at the age of 18 or 25.

“As extended caregivers, grandparents are eligible to purchase whole life insurance for their grandchildren,” according to SelectQuote, which helps people shop for insurance policies. “The insurance can be purchased in the child’s name, which means the child becomes the policy owner once they are an adult.”

You outline all of the misdeeds and absences by your former husband and mother-in-law, and it clearly is very emotionally triggering that this policy exists. It appears to bring up all of those bad memories and resentments. I don’t doubt any of the bad behavior or how your daughter’s father failed to show up in her life.

However, by obsessing over this policy and agonizing about how it can be undone, you may as well be married to both of them. Whether you instigate poor behavior or not, you have a choice: You can let them live their lives, or become hostage to their every move.

If you choose the latter, ask yourself what you get out of choosing this path — because it is a choice. Perhaps this anger is a familiar place for you, and the resentment allows you to feel righteous and wronged, and reminds you that you have done your best to be a good person.

Whatever the reasons, these short-term surges of hurt and anger — however valid — do not serve your long-term happiness. The whole point of getting divorced and starting a new life is to leave these petty preoccupations behind. It will only create a toxic family atmosphere.

Taking out a life-insurance policy on a grandchild, someone who is young and healthy, can have advantages. “Plans for grandchildren seldom require an exam, rates will never increase, and coverage never expires,” according to Choice Mutual insurance agency.

There are two main types of life insurance: The first is term life, which exists for a period of time and has no cash-out value. The second is whole life — also known as universal life, variable universal life and indexed universal life — which, as the name suggests, lasts for the person’s entire life. 

Your former mother-in-law could either wait and, in the unlikely event that your daughter predeceases her, cash in the policy. Alternatively, she could use it as a de facto savings plan, and borrow from the policy or money early. Speculating on what she may or may not do, however, is not healthy.

Whether her motivations are self-serving or altruistic, your former mother-in-law will have a premium to pay for every life-insurance policy she owns. If she does not keep up on the premiums, the policies will expire. That’s her lifelong responsibility, and her choice. Do yourself a favor and leave her to it.

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