What Happens to Life Insurance in an Illinois Divorce?

arlington heights divorce lawyerLife insurance can be an uncomfortable topic to think about, as it brings to mind the possibility of death for you or a loved one. It can also be an easy topic to overlook during a divorce, especially if you and your spouse are relatively young and in good health. However, a life insurance policy has tangible financial benefits, meaning that it often becomes a factor in the division of marital assets and other aspects of the divorce process. You should be sure to understand what may happen to your policy and make plans to ensure that the benefits are distributed according to your needs and wishes.

Life Insurance and Property Division

Life insurance policies come in different varieties with different kinds of benefits. Term life policies typically only include a death benefit paid to the policy’s named beneficiary only if the insured person dies. On the other hand, whole life policies also have a cash value that accumulates over time. This cash value is essentially a type of investment, and it is possible to borrow or make withdrawals from it at any time. As such, it can be of immediate concern in a divorce when couples are dividing marital assets. To ensure an equitable distribution, the cash value may need to be divvied between spouses, or one spouse may need to compensate the other with different assets.

Updating Beneficiaries

No matter what type of life insurance policy you have, it is important to address the beneficiary for the death benefits in your divorce resolution. According to Illinois law, if a person’s spouse was named as the policy’s primary beneficiary, a divorce nullifies the spouse’s beneficiary status. This may take you by surprise if your ex-spouse dies after your divorce and you are unable to receive the death benefit. However, it is possible to remain your former spouse’s beneficiary by ensuring that your divorce resolution explicitly states that this will be the case.

Taking Out a New Policy

In some cases, a divorce resolution may include provisions for taking out a new life insurance policy on one of the spouses. For example, if a spouse is ordered to pay alimony, a life insurance policy can ensure that those payments continue even if the paying spouse dies. Without such a provision, the spousal support obligation would automatically terminate upon the paying spouse’s death.

Contact an Arlington Heights Divorce Attorney

A divorce can involve many complicated financial issues, some of which you may not expect. At Cosley Law Office, we will ensure that you have considered all of the financial implications of your divorce and taken steps to protect your interests with respect to a life insurance policy and other spousal benefits. For a free consultation, contact our Rolling Meadows divorce lawyer today at 847-253-3100.

Sources:

https://www.ilga.gov/legislation/ilcs/documents/075000050k503.htm

https://chicago.cbslocal.com/2021/05/05/quirk-in-illinois-state-law-voids-life-insurance-benefits-for-ex-spouses-upon-divorce/

 

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