Many married couples with children will take out a life insurance policy to ensure their family is covered in the event of an unexpected death. Typically if minors are involved, one spouse will name the other as the beneficiary with the expectation they will look after the children when they are gone.
Term Life Insurance Policies in an Illinois Divorce
Divorce decrees often require that life insurance policies take certain actions such as providing coverage to satisfy a child support obligation or spousal maintenance in the event the payor dies while the support order remains in effect.
In cases where the children are grown and there is no longer a child support obligation, or spousal support has run its course, it is prudent to change the beneficiary on the policy so an ex-spouse does not inadvertently benefit after the divorce.
Certainly, there are a number of choices to be made regarding adjustments to life insurance in a divorce. Start by checking who the beneficiaries are to any life insurance policies that may have been taken out years prior. In Illinois, divorce does not automatically change or revoke a beneficiary designation on life insurance, so the policy owner must actively change the beneficiary after the divorce if they want the ex-spouse removed.
If, on the other hand, the policy holder is court ordered to change the beneficiary/maintain the ex-spouse or children as beneficiaries, it is important to update the policy as required. If a spouse is so ordered, the intended beneficiary should keep periodic tabs on the policy ensuring that it remains active and they are listed indeed the beneficiary.
Domestic relations orders pertain to life insurance policies requiring one spouse to list the other as a beneficiary in divorce when children are involved, often as a guarantee of child support. The DRO may require one spouse to pay premiums on policies, take out a new policy on themselves, or increase coverage in the event of their own death to ensure support can be replaced in the event of death.
Single parents who do not receive financial support from an ex-spouse, often because they are wholly out of the picture, may wish to name a guardian as the beneficiary to a life insurance policy as minors are in illegible. Alternatively, opening a custodial account or setting up a trust for a child to receive the life insurance benefit is an option, where the guardian or trustee can be responsible for the funds tilt the child turns 18.
Dividing Whole Life Insurance Policies in a Divorce
Unlike term life insurance policies, which are generally owned by individuals and do not accrue cash value, permanent life insurance, such as whole life and universal life policies, have inherent cash value that grows over time. These type of policies are considered marital property to be divided in a divorce. One spouse might buy out the other’s share of the policy or use other marital assets to offset the value, or, the divorce decree might require that the policy be surrendered and the cash value split between spouses.
Contact an Experienced Family Law Attorney
Having a knowledgeable and skilled family law attorney negotiating on your behalf during your divorce is fundamental to attain the best results. An experienced Illinois family law attorney will answer all your questions regarding the division of marital assets and marital debt, spousal maintenance, child support and parenting time and responsibility and will also provide guidance when it comes to life insurance beneficiary designations to ensure your continued financial support or dividing whole life policies as part of the equitable division of property in an Illinois divorce. Contact the lake county family law offices of Ronald L Bell & Associates P.C. for help at 847-495-6000.