California Case Update: Form of Title Presumption Controls Characterization of Life Insurance Policy
California is a community property state, which means that all property, with certain exceptions, acquired during marriage is considered to be a part of the marital community and not one’s separate property. At common law, there is a rebuttable “form of title” presumption which, absent a contrary state law or proof as to otherwise, deems record title as determinative of the property’s characterization as separate or community. In a 2011 California Appellate Court case, the Second District confirmed that this rule applies when a life insurance policy is in the name of one spouse.
In Marriage of Valli, 195 Cal. App. 4th 776 (2011), Husband purchased a $3.75 million life insurance policy on his life with community property funds and put the policy in Wife’s name. Husband and Wife were married for twenty years with three young children. At the time of purchase, Husband had been experiencing medical problems and wanted to ensure his family was taken care of. Husband put everything in Wife’s name so that she could use it to take care of the children or disburse it as she saw fit. When the couple decided to separate, there was a dispute as to whether the policy was community property or the wife’s separate property.
The trial judge found that the policy was community property because it was acquired during the marriage and the policy’s premiums were paid during marriage. The appellate court reversed the trial court holding that the “form of title” presumption applied and the policy was therefore Wife’s separate property. The court reasoned that the act of taking title to property in the name of one spouse during marriage with the consent of the other spouse effectively removed that property from the general community property presumption. This presumption can only be overcome by clear and convincing evidence that there was an agreement that the title did not reflect the parties’ intent. In Valli, Wife established that the policy was taken in the Wife’s name, and Husband failed to rebut the title presumption with any evidence of an understanding with Wife that, despite the policy being in her name, they did not intend the policy to be Wife’s separate property.
While decisions made during marriage may seem appropriate at the time they are made, it is important that marital partners take the time to consider every scenario that may arise in the future. The Certified Family Law Specialists* at Lonich Patton Erlich Policastri have decades of experience handling complex family law matters. If you are contemplating divorce, please contact the Certified Family Law Specialists* at Lonich Patton Erlich Policastri, who can provide you with an in-depth analysis of your issues. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.
*Certified Family Law Specialist, The State Bar of California Board of Legal Specialization