What happens when your client’s ex is still his named life-insurance beneficiary?

It comes up often. Maybe more often than not. “Under Illinois law, a former spouse’s designation as a beneficiary to a life insurance policy is not automatically terminated upon divorce,” write Lauren J. Wolven and Ashley E. Crettol in the August 2010 issue of the ISBA Trusts and Estates Section newsletter. “Unfortunately, it is also a common occurrence that the named beneficiary is never changed following divorce." But death waits for no man. Or woman. Whether or not he or she has changed his or her life insurance beneficiary. “As a result of these two factors,” they continue, “litigation is common in this area as a result of competing claims for the proceeds of life insurance policies – ex-spouses who remain the designated beneficiary claim that they are entitled to the proceeds while other family members or subsequent spouses assert that they are the intended beneficiary.” They go on to discuss Illinois law on the issue and a recent case from the northern district, Richard v Martindale, No 09 CV 4159 (ND Ill, June 14, 2010).  The husband in that case never got around to removing his ex-wife as the named beneficiary of his life insurance policy. The court held that a divorce decree that "waived a spouse’s beneficial interest to a life insurance policy trumped any subsequent inference that the spouse remained the intended beneficiary,” Wolven and Crettol write, a ruling that “confirms Illinois’ current law regarding the issue.” A key practice takeaway, according to the authors: make sure your client’s divorce decree includes a waiver like the one in Martindale. “By tracking waiver language that has been found by the courts to be valid, practitioners are more likely to safeguard their client’s intent.” The article is Life insurance litigation post-divorce: easy to avoid, commonly neglected. Lauren is a partner at Horwood Marcus & Berk in Chicago, and Ashley is beginning her third year at Chicago-Kent College of Law.