People going through divorce may see the divorce decree as the end point of a long process. But divorce also necessitates updates to the estate and retirement plans as well.
In Illinois, a divorce decree will cause a will or a revocable trust to be interpreted as if the former spouse had predeceased the testator. Except to the extent that a divorce decree orders a particular distribution of property, however, it remains up to the individual to revise any other allocations.
This includes beneficiary designations on life insurance, pensions, retirement accounts such as IRA and 401(k) accounts, and annuities. It also includes transfer on death designations, such as on bank or brokerage accounts, or even real estate.
During marriage, the spouse often is designated as a primary beneficiary of such assets. To change the beneficiary arrangement on an account or insurance policy, the account holder needs to notify the bank, brokerage, or insurance company in writing or file a form with them.
If a former spouse is named as beneficiary and no updates are made, the former spouse will likely receive the proceeds when the asset is distributed. Therefore, to truly ensure a complete and total separation after a divorce, it is worth reviewing an estate plan and beneficiary designations on all assets.