Life Insurance and Divorce: Remember to Change Your Beneficiary
The financial implications of divorce can certainly be far-reaching. In some cases, they may continue to impact a divorced couple even after the death of one ex-spouse. This often occurs in situations involving life insurance policies that were addressed during proceeding related to the division of property.
As with any asset acquired during the course of marriage, most life insurance policies are considered marital property. They were generally purchased with marital assets and intended for the benefit of the surviving spouse and children. Therefore, during a divorce, the value and future proceeds of a life insurance policy must usually be considered and allocated equitably, according to Illinois law.
Some divorce agreements will require the owner of the policy to keep his or her ex-spouse as the beneficiary. This may be done to provide an alternative source of spousal maintenance or child support, for example, in the event of the payor’s untimely death. An ex-spouse may also remain as a beneficiary of the policy simply to offset the policyholder’s allocation of a different marital asset. For example, in exchange for being allowed to keep a jointly-owned vehicle, the policyholder may agree to keep his ex-wife as the policy’s beneficiary.
Other situations may permit the policyholder to remove his or her ex-spouse as beneficiary under the terms of the divorce agreement. The owner of the policy in a case like this may choose another beneficiary at his or her discretion. However, the terms of the divorce agreement will not automatically invalidate an existing designation. There are many examples of cases in which a policyholder never changed his or her beneficiary, leading to contentious litigation between ex-spouses, subsequent spouses, and other family members after his or her death.
Potential problems can be fairly easily avoided, though. Most life insurance companies have a very simple process in place for naming a new beneficiary. After the finalization of the divorce agreement, a policyholder is often able to call the insurance company and request a beneficiary change. The required paperwork is generally minimal, and in some cases, can even be completed online. In matter of minutes, weeks and months of future problems can be prevented.
If you have questions about how your life insurance policy may be handled during your divorce, contact an experienced Illinois divorce attorney today. Our team fully understands the property division process and is equipped to help you achieve a favorable outcome.