Going through a divorce can sometimes feel like a puzzle; there are a million pieces and they have to fit together just so. One of those pieces that can often be overlooked is life insurance.
Between custody, maintenance (alimony), and the emotional landmines of divorce, life insurance is often the last thing divorcing couples want to think about. However, if you are getting a divorce, then life insurance may be necessary to protect your and your children’s financial interests.
Another way to look at life insurance is if one spouse is paying maintenance (alimony) and/or child support, the recipient spouse may request that a life-insurance policy is taken out, naming the recipient spouse the beneficiary. If something should happen to the spouse paying support, the surviving ex-spouse and children will still be taken care of financially.
If life insurance will be part of your divorce, you need to consider including the following terms:
- The amount of insurance needed
- Who will be the beneficiary of the policy
- How long the insurance must remain in force
When contemplating divorce, if your soon to be ex-spouse is the current beneficiary of your life insurance policy, you may consider changing the beneficiary to your children or some other trusted person.
Effective January 1, 2019 Illinois law will change. The new law eliminates a former spouse as the beneficiary of a life insurance policy after divorce. However, there are three exceptions that include:
- The divorce decree designates the insured’s former spouse as the beneficiary
- The insured re-designates the former spouse as the beneficiary after the divorce
- The former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse
Utilizing a divorce lawyer who has a full view of the financial aspects of divorce is critical. As both a lawyer and a CPA, I have a nuanced understanding of both the legal and financial impact of divorce. Feel free to contact me to learn more.
