Life Insurance in Divorce

Our Attorneys Will Help You Understand How Divorce Affects Life Insurance

If you have life insurance and you are getting divorced, you likely have some questions about how your life insurance policy will be handled in the divorce. Generally speaking, courts classify property as either separate property or marital property, recognizing that separate property will not be divided in a divorce. Only marital property will be distributed between the spouses, and it will be distributed in a way that the court determines to be equitable based on the facts of the marriage. Under the Illinois Marriage and Dissolution of Marriage Act (IMDMA), life insurance is not typically divisible in a divorce because benefits are paid upon death, but it is possible that some of the interest in a life insurance policy may be marital property that must be distributed. Beyond the consideration of classifying and dividing any interest in a life insurance policy, divorce also raises the question of beneficiaries and whether an ex-spouse can or should receive a life insurance payout.

Our Chicago divorce attorneys want to address both issues for you to help you understand the ways in which divorce affects life insurance in the Chicago area.

Interest in a Life Insurance Policy May be Divided According to Equitable Distribution

Since Illinois is an equitable distribution state, any interest in a life insurance policy that is classified as marital property will be divided in a manner that is fair to both spouses. The IMDMA says that a spouse’s life insurance policy will be divided equitably between the spouses if it is deemed marital property.  

To be clear, the benefit itself—the life insurance payout—is not usually divided in a divorce since it is not paid until the person dies. Yet the court can determine that one of the spouses should still receive that payout after the divorce.

Ex-Spouse as a Life Insurance Beneficiary

How does divorce affect an ex-spouse being listed as a beneficiary? Under the IMDMA, if an ex-spouse is named as a life insurance beneficiary at the time of the divorce, that ex-spouse automatically is removed as a beneficiary (i.e., that spouse’s designation as a beneficiary is not effective, according to the IMDMA). However, there are some exceptions. The ex-spouse will not be automatically voided as a beneficiary if any of the following are true:

• Divorce judgment designates the ex-spouse as a beneficiary;
• Insured redesignates the ex-spouse as a beneficiary after the divorce; or
• Ex-spouse is the designated beneficiary for the benefit of a child or other dependent of the insured.

If you have questions about how life insurance beneficiary designations work after a divorce, you should talk with your Chicago divorce attorney.

Learn More From a Chicago Divorce Lawyer

Dealing with life insurance in a divorce can be complex, but our Chicago divorce attorneys can assist you. Contact Arami Law, Inc. for more information.