Insurance Policies and Divorce

Kane County divorce attorneysWhen marital assets are discussed, the first things to be divided in divorce are usually homes and vehicles. There is, however, another type of asset that can arguably be more important: insurance policies of any kind, most specifically life insurance. Insurance policies can have significant payouts and can tip the balance in terms of property and asset division.

Child Support and Life Insurance

In Illinois, if you have children, it is not uncommon that a court may ask you and your spouse to maintain life insurance policies on yourselves as both a way to provide for the children in an emergency and a way to secure a child support obligation. The reasoning is not to give the former spouse a payday in the event of your death, but to ensure that your children are adequately provided for. Some former spouses hesitate to do this, but it is almost always the quickest and easiest way to ensure that your children are protected. Also, it is very often the case that the obligation to maintain life insurance results in a slight offset of child support expenses for the paying parent.

While some have legitimate concerns about money being in the hands of fiscally irresponsible ex-spouses, there is a workaround. The most common is to list your children as the beneficiary of the life insurance policy, rather than your spouse. Your ex-spouse will still have access to the life insurance money (in theory) if it is ever paid out, but he or she will have a fiduciary duty to ensure that the proceeds of the policy are used to benefit the children. Failure to uphold that fiduciary duty can leave them open to contempt or embezzlement charges.

Life Insurance as Marital Property

Depending on the situation, a life insurance policy can be considered marital or non-marital property in Illinois. If a policy is held to be marital property, the Illinois statute states explicitly that both the proceeds and the obligation to pay further premiums (if any) will be divided equitably—that is, in the way the court deems the fairest.

It still may be possible for a spouse to collect the benefits on an insurance policy declared non-marital property, though it is not the fault of the courts. In Illinois and many states, the beneficiary on an insurance policy must be changed manually by the policyholder. A divorce does not automatically negate the naming of life insurance beneficiary. If you neglect to name a new beneficiary on your policy after your divorce, your ex-spouse will still be entitled to the proceeds of the policy upon your death.

Ensure Your Legal Affairs Are in Order

While financial affairs are often best handled by an actuary or Certified Public Accountant (CPA), an experienced Kane County family law attorney can help you remain in compliance with the law. If you have questions about how your insurance policies could be affected by your divorce, contact our office today and get the answers you need.



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