Life Insurance

It is important to remember that beneficiaries should not be changed on any insurance policy after a divorce is commenced (see above regarding automatic temporary restraining orders). If the life insurance policy was purchased with community funds, and it is a whole life policy, there will be a proportional community property interest in the policy. If the policy is a term policy, there will be no community property interest unless the policy is paid for with community funds and the insured spouse either dies or becomes uninsurable during the term paid with community funds (Estate of Logan 191 Cal.App.3d 319 (1987); In re: Marriage of Spengle, 5 Cal.App.4th 288 (1992); and In re: Marriage of Elmont, 9 Cal.4th 1026 (1995) (specifically addressing term insurance). Upon death of the insured under a term life policy, the surviving spouse will have a community property interest in the proceeds, notwithstanding any designated beneficiary to the contrary, if community assets were used to pay the final premium (Minnesota Mutual Life Insurance Company v. Ensley 99 D.A.R. 3292 (9th Cir., U.S.C.A., 1999), No. 55560, filed April 6, 1999). If the final premium is paid with separate property, there will be only a separate property interest in the proceeds upon death of the insured, and the proceeds will pass exclusively to the designated beneficiary.

Generally, upon divorce, a term life insurance policy is not a divisible community property asset because it has no cash value (In re: Marriage of Lorenz, 146 Cal.App.3d 464 (1983). In some cases, an argument may be made that the term policy has a replacement value and is therefore subject to division (In re: Marriage of Gonzalez, 168 Cal.App.3d 1021 (1985).


Copyright © 1999 Roy A. Barry, all rights reserved.