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Divorce Does Not Change Life Insurance Beneficiaries

Posted on in Divorce

Divorce Does Not Change Life Insurance BeneficiariesIllinois law is inconsistent when it comes to divorce and your beneficiaries upon your death. Once your divorce is final, your former spouse will automatically lose his or her status as your primary beneficiary in your will or trust, as well as any control over your estate. If you fail to update your estate plan before your death, a probate court will likely assume that you did not intend for your former spouse to remain your primary beneficiary. However, Illinois has no law that automatically removes your former spouse as the primary beneficiary in your life insurance policy. You must decide and act on any changes to your life insurance beneficiaries.

Choosing a Beneficiary

Unlike with an estate plan, Illinois courts have ruled that failing to update a life insurance policy after a divorce shows that the policyholder intended for his or her former spouse to remain the primary beneficiary. Some people choose to keep their life insurance beneficiaries the same because:

  • The insurance can replace spousal maintenance payments if the payer dies before the maintenance obligation is over; and
  • The children may be the preferred beneficiaries but the other parent is the person who would need the money for child-related costs.

You can make your children the primary beneficiaries of your life insurance policy if you are concerned about how your former spouse would use the money. He or she would be the trustee of the money while the children are still minors but would be obligated to use the money for child-related purposes.

Making Changes

The clearest way to remove your spouse from your life insurance beneficiaries is by including it in your divorce agreement. The agreement should state that your former spouse has waived his or her claim to your life insurance benefits. You can also change the policy on your own once your divorce is final. If your life insurance is a work benefit, you need to tell your employer of your decision to change your beneficiaries. The Employee Retirement Income Security Act of 1974 can overrule a beneficiary waiver in your divorce agreement if your employer was never notified of the change.

Your Estate and Your Divorce

During your divorce, it is wise to inspect all of your estate planning documents to determine which ones need to be changed. If your documents have not been updated, your survivors may be unsure of your intentions for your estate. A McHenry County divorce attorney at Botto Gilbert Lancaster, PC, can help you review your estate plan as part of your divorce. Schedule a free consultation by calling 815-338-3838.



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