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Dealing with life insurance in a California divorce

On Behalf of | May 25, 2021 | High-Asset Divorce

Dealing with the division of assets in a California divorce oftentimes proves to be the most challenging, complicated aspect of the end of a marriage. The more assets involved, the greater the odds that an acrimonious situation will develop. In this regard, people heading towards or in the midst of a divorce may wonder how life insurance policies are addressed.

California is a community property state

Before diving deeper into the matter of a high-asset divorce, asset division and dealing with life insurance, initially understanding that California is a community property state is imperative. In a California divorce, the presumption is that marital assets or property obtained during the course of a marriage are to be split evenly between the divorcing spouses.

Term life insurance in a California divorce

Typically, determining what happens to term life insurance is not complicated in a California divorce. As the name implies, term life insurance is in force for a period of time, typically somewhere between 10 to 30 years. The reality is that such a life insurance policy has no value until the person the policy covers dies. At that time, the beneficiaries names in the policy have an interest in the proceeds of the policy.

Due to the fact that such a policy has no value, it typically goes with the person it covers. One caveat is that an offset may be allowed giving the other spouse a credit for 50% of the money spent on premiums during the marriage.

Whole life insurance in a California divorce

A whole life insurance policy does accumulate a cash value. As a consequence, the party that does not retain ownership of a whole life policy in a divorce case likely will be entitled to credit and an offset using some other asset in an amount equal to 50% of the cash value

Finally, in cases involving children, the parties to a divorce may agree or the court may order that the beneficiaries of a life insurance policy remain the minors born of the marriage. This may remain in place until a child reaches a particular age.