Getting Divorced? You Should Review Your Estate Plan
The divorce has been finalized; the property divided, and you and your ex-spouse have moved on to the next phase of your lives. There may be one thing you forgot though, something neither of you will remember until it is too late: updating the beneficiary designations on your retirement accounts and life insurance policies.
Most people designate their spouse as the beneficiary of retirement benefits and life insurance proceeds, and then promptly forget about it. Or they may think that the divorce automatically revoked the now ex-spouse’s right to receive these assets at death. In Illinois, this could be a costly mistake. Failure to update your beneficiary designations following a divorce, or failure to include specific waiver of these rights in the divorce decree, can result in your ex-spouse getting the assets at your death.
Automatic Revocation of Estate Plan After Illinois Divorce
Illinois law automatically revokes any gift to your spouse made in your will or trust once the divorce is final. This means that if you never got around to updating your will after the divorce was finalized, your ex-husband will not inherit one cent from your estate, even though the will left him everything. Instead, your estate will pass to the named successor in the will.
This law does not, however, apply to beneficiary designations on life insurance policies and retirement accounts. In fact, Illinois has no law that automatically revokes the designation of a spouse as beneficiary of a retirement account or life insurance policy following divorce. This means that if your husband is the named beneficiary on your life insurance policy, and you failed to update the beneficiary designation after the divorce, your now ex-spouse will still receive the proceeds.
Protecting Retirement and Life Insurance Proceeds
If you are divorcing in Illinois and own a life insurance policy or retirement account, how do you ensure it does not pass to your ex-spouse after your death? The easiest way is to make sure to update your beneficiary designations once the divorce is final.
Inclusion of a properly worded waiver in the divorce settlement agreement will ensure that the proceeds from your life insurance policy or retirement account will not pass to your ex-spouse, if he is still the named beneficiary at your death.
The waiver must be specific in order for it to terminate any right either spouse has in the other’s life insurance policy or retirement account; a general waiver is not good enough. The Illinois Courts have ruled that a waiver of “all rights, interests, expectancies, and beneficial interests that he or she now has or would have upon the death of the other party under any ... life insurance policy” is specific enough to terminate either spouse’s right to proceeds from the life insurance policy where one spouse fails to remove the other as the designated beneficiary.
Palatine Divorce Attorney
If you are contemplating divorce and own retirement accounts, life insurance policies, or both, you need an experienced Illinois family law attorney. The Law Office of Nicholas W. Richardson, P.C., understands the importance of ensuring that your beneficiary designations are updated following the divorce, and can draft a waiver of your soon-to-be ex-spouse’s rights to these assets that will stand up in Court. Contact the Palatine Law Office of Nicholas W. Richardson, P.C., today to schedule a consultation.