life insurance Archives - Lonich Patton Ehrlich Policastri

Life insurance is usually not high on the list of concerns during a divorce. However, it is important to know that under certain circumstances life insurance can be an important asset.

In California, Can Life Insurance be Divided?

California is a community property state, which means that anything earned by the couple is owned equally be each partner. When life insurance is purchased with community money it is possible that the proceeds of the life insurance policy may be community property.

There are two types of life insurance: whole life insurance and term life insurance.

The first type of life insurance is whole life insurance. For whole life insurance, the policy accumulates a “cash value”. The amount of the policy that was purchased with community money is considered to be divisible property in divorce.

The second type of life insurance is term life insurance. Term life insurance is a contract providing only coverage during a specified term and has no cash value. Term life insurance purchased with community money is community property. However, the property in term life insurance is the right to have coverage during the individual term paid for with community money. Because the couple has already received the “benefit” of the policy during the marriage, the policy is not considered to be a divisible asset.

If the partner for whom a term life insurance policy is maintained were to pass away during a term in which any community funds were used to purchase the term policy, a portion of the policy proceeds would be community property and subject to division in a divorce.

Can Life Insurance be Awarded as Child or Spousal Support?

California family law provides broad discretion in matters of spousal and child support. A judge may order a parent to buy an insurance policy with the child or spouse named as the beneficiary.

California law allows life insurance to be awarded for child support because the obligations of the parent extend beyond death. A judge may order a life insurance policy as child support when the judge believes that the ordered parent may have trouble providing for the child.

Life insurance awards for spousal support allows a judge to order a spouse to purchase a policy with the other spouse named as the beneficiary. The judge’s ability to order life insurance as spousal support is directly stated in California Family Code section 4360.

Is There Anything Else to be Aware of?

It is important to remember that a life insurance policy is a separate contract from marriage. The named beneficiary of a life insurance policy does not automatically change following a divorce. The holder of the policy must contact the life insurance provider to request a change of beneficiaries.

Another item to keep in mind is that even if a life insurance policy is not discussed during divorce proceedings, it can be brought before a judge later as an “omitted asset.” The judge may then decide on whether the policy should have been divided or have been included in an award of support.

Determining the rights to life insurance in divorce can be complicated. It is important to understand your rights to a life insurance policy both during and after divorce. If you have questions about your or your partner’s life insurance policy, please contact one of the experienced attorneys at Lonich Patton Ehrlich Policastri.

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 detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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 Ehrlich 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 Ehrlich 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

Posts

The Ins and Outs of Life Insurance During Divorce

In California, Can Life Insurance be Divided?

Can Life Insurance be Awarded as Child or Spousal Support?

Is There Anything Else to be Aware of?

California Case Update: Form of Title Presumption Controls Characterization of Life Insurance Policy

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