Changing Your Estate Plan After a Divorce

The Illinois Marriage and Dissolution of Marriage Act (“IMDMA”) provides that “if a judgment of dissolution of marriage is entered after an insured has designated the insured’s spouse as a beneficiary under a life insurance policy in force at the time of entry, the designation is not in force.” 750 ILCS 5/503(b-5)(2). In other words, if a spouse is named as beneficiary of a life insurance policy prior to divorce, that beneficiary designation automatically becomes ineffective after the divorce, even if you intend for your former spouse to receive the policy proceeds after your death. There are a few exceptions to this rule – specifically:

• the court can order in the divorce judgment that the spouse will remain as beneficiary;
• the (former) spouse can be re-designated as beneficiary after the divorce; or
• the designation will be effective if the (former) spouse was 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.

Note that if a designation is not effective under the above rule, the proceeds of the policy are payable to the named alternative beneficiary or, if there is not a named alternative beneficiary, to the estate of the insured.

Important Takeaways:

• Review the beneficiary designation and alternate beneficiary of your life insurance policies.
• Review and update your health care proxy and power of attorney.
• Update your will, and if necessary, amend your trust.
• Finally, revisit your estate plan once the divorce is finalized to ensure everything is in order. 

For assistance in updating your estate plan, or to learn more about estate planning alternatives, please reach out to attorney Heather Walser at hgwalser@lavellelaw.com or 847-705-7555 to schedule a free consultation.