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California Appellate Court Determines Life Insurance Policy Purchased with Joint Funds Is Community Property

Earlier this month, the Supreme Court of California issued a written opinion in a California property division case that required the court to determine if a life insurance policy purchased by the husband and naming the wife as the sole beneficiary should be considered communal property at a dissolution proceeding, or whether it was properly found to be the wife’s separate property. Ultimately, the court concluded that the insurance policy was communal property, and the court reversed the intermediate appellate court’s finding to the contrary.

CalculatorThe Facts of the Case

The husband and wife were separated in 2004 after 20 years of marriage. Prior to the couple’s separation, the husband purchased a $3.75 million life insurance policy, using communal funds from the couple’s joint bank account. Likewise, the policy premiums were also paid out of the couple’s joint bank account. The policy named the wife as the sole beneficiary.

At a dissolution proceeding, the wife wanted to have the insurance policy considered as her own separate policy. The testimony showed that the husband obtained the policy when he was in the hospital suffering from heart problems, that at the time he had no plans on separating from the wife, and that he put the policy in her name, assuming she would use the proceeds to take care of the couple’s three children. The trial court determined that the insurance policy was community property and ordered the husband to buy out the wife’s interest. The wife appealed, and the case was reversed by the intermediate appellate court, finding that the policy was the wife’s separate property. The husband appealed.

The California Supreme Court’s Opinion

The California Supreme Court reversed the intermediate appellate court’s decision, finding that the insurance policy was properly considered community property. The court explained that, in general, property obtained during a marriage is considered community property unless an exception applies. Here, the wife argued that the status of the insurance policy changed from community property to her own separate property when the husband named her as the sole beneficiary.

The court explained that in order for property to transmute, or change, from community property to separate property, there must be an “express declaration” signed by the adversely affected spouse. However, the wife did not have an express declaration signed by the husband. Instead, she claimed that the transmuting requirements did not apply because the insurance policy was technically payable by a third party – the insurance company – rather than by the husband.

The court rejected the wife’s argument, finding that the legislative intent behind the relevant statute did not support her position. As a result, the court remanded the case back to the intermediate appellate court so that it could properly analyze the remaining issues in the case.

Are You in the Middle of a Bay Area Divorce?

If you are currently involved in a California divorce, or you are considering filing for divorce, you should seek the assistance of a dedicated Bay Area property division attorney. Attorney John S. Yohanan has over three decades of experience assisting clients with various family law issues, including California divorce proceedings, child custody determinations, and child support awards. He understands that each client and each case is unique, and he provides each client the individualized attention they deserve. Call 408-297-0700 to schedule a free consultation with Attorney Yohanan today.

Related Blog Posts:

California Child Custody Cases: Gauging Best Interests, Bay Area Divorce Attorney Blog, August 31, 2017

Court Refuses to Retroactively Apply Permanent Spousal Support Order in Recent California Divorce Case, Bay Area Divorce Attorney Blog, August 15, 2017

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