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An Ex-Wife's Rights after the Death of a Former Husband
Does an ex-wife get her deceased, ex-husband's life insurance proceeds if he failed to change her as beneficiary of his policy after their divorce?
She may well do so.
In Illinois, your divorce does not automatically void the designation of your ex-spouse as beneficiary of your life insurance policy. The entry of a divorce in Illinois, or a Judgment for Dissolution of Marriage, does not automatically terminate your ex-spouse as beneficiary of your life insurance policy.
However, some states have laws that a spouse’s beneficiary status is automatically terminated by entry of a divorce or Judgment for Dissolution of Marriage. These "divestiture" statutes make it clear that divorce, by itself, terminates your ex-spouse as beneficiary of your life insurance policy—but not so in Illinois.
Illinois courts have ruled that a divorce decree (judgment) does not terminate the property rights of a husband and wife that exist independently of the marriage (see Leahy v. Leahy-Schuett, 211 Ill. App. 3d 394 (1st Dist. 1991.)).
Illinois courts justify this position by saying that if you wanted to change your ex-spouse as beneficiary of your life insurance policy after your divorce you could simply have done so. The fact that you did not, and then passed away, means that you intended your ex-spouse to receive the benefits.
What can I do to prevent my soon-to-be ex-spouse from receiving my life insurance proceeds upon my death?
First, have a written Marital Settlement Agreement (MSA). This will become part of your Judgment for Dissolution of Marriage. You can have a soon to be ex-spouse waive any rights to receive benefits under your life insurance. Be aware, however, that general waivers of property rights found in most MSA's are not sufficient. The waiver must specifically mention the life insurance policy that you were trying to protect. Illinois courts have found waiver sufficient where:
The life-insurance policy was specifically disclosed in the MSA and awarded to a spouse; and
The waiver provision contained in the MSA specifically stated that the spouse is waiving an expectancy or beneficial interest in the Life insurance policy (see Leahy v. Leahy-Schuett, 211 Ill. App. 3d 394 (1st Dist. 1991.)). The test is whether a reasonable person would understand that he or she is waiving an interest in that asset (see Clift v. Clift, 210 F.3d 268, (5th Cir. 2000)).
Second, check to make sure that your life insurance policy is not a group policy governed by ERISA. ERISA is a federal statute originally created to protect employee benefit participants and their beneficiaries. If your life insurance policy is under ERISA, you must advise your employer that you are changing your beneficiary designation away from your soon-to-be ex spouse. Additionally, make sure that it is properly recorded with your employer.
A beneficiary designation under ERISA wins out over the language contained in your MSA. So if you fail to notify your employer of the beneficiary change, even if your soon-to-be ex spouse waives off being the beneficiary, he or she may still be the beneficiary (see Kennedy v. Plan Administrator for DuPont Sav. and Investment Plan 555 U.S. 285 (2009)).
If you are considering divorce and would like to know how it may impact you in regards to your spouse's life insurance policy, a knowledgeable and experienced DuPage County divorce lawyer at Martoccio & Martoccio can help. Please call 630-920-8855 to schedule your consultation. We look forward to assisting you.