Celebrities: they’re just like us, well sort of anyway. Among other things, that means that they often encounter the same types of issues as regular folks in divorce cases.California is a community property state, in which property acquired by a spouse during the marriage, except for gifts or inheritance, is shared equally between the spouses in the event of divorce. That might seem like a pretty clear-cut rule, but divorcing spouses often resort to the courts to decide disputes over how certain property should be characterized or divided. The California Supreme Court recently took on the issue as it applies to a life insurance policy taken out by one spouse – legendary singer Frankie Valli – for the benefits of the other.
Husband and Wife separated in September 2004 after 20 years of marriage. More than a year before, Husband used money from a joint bank account to purchase a $3.75 million life insurance policy. He named Wife as the sole owner and beneficiary of the policy and paid premiums with funds from the joint bank account.
Wife later testified that she and Husband had discussed buying the policy while he was in the hospital being treated for a health issue. Husband said he had no plans to divorce when he purchased the policy and added that he put everything in her name with the expectation that their three adult children would be taken care of in the event of his death.
The trial court ruled that the policy was community property, noting that it was acquired during the marriage with community money. That court awarded the policy to husband and directed him to pay Wife $182,000, half the policy’s cash value at the time. But an appeals court later reversed the decision, holding that the policy was Wife’s separate property.
That’s when the state supreme court stepped in. The high court concluded that the life insurance policy was community property because Husband never said he was giving up his interest in it. “Married persons may, through a transfer or an agreement, transmute — that is, change — the character of property from community to separate or from separate to community,” the court said. “A transmutation of property, however, is not valid unless made in writing by an express declaration that is made, joined in, consented to, or accepted by the spouse whose interest in the property is adversely affected.” Here, the court said, there was no such declaration.
Simply making Wife the owner and sole beneficiary of the policy wasn’t enough to serve as a declaration that Husband was giving up his interest in it, according to the court. It also rejected Wife’s claim that the declaration requirement doesn’t apply to situations where a spouse purchases something from a third party with the intent to give it to the other spouse. The court noted that only gifts that are not “substantial in value” are exempt from the requirement. In other words, the court explained that gifts that are “substantial in value” are subject to the requirement, even though they’re generally purchased by one spouse from a third party.
“Husband never expressly declared in writing that he gave up his community interest in the policy bought with community funds,” the court wrote. “Accordingly, we agree with the trial court’s characterization of the insurance policy as community property.”
If you’re considering a divorce in California, it is imperative that you seek the advice and counsel of an experienced family law attorney. With offices throughout the Bay Area, California divorce lawyer Lorna Jaynes provides innovative legal tools to resolve family law disputes without the bitterness and acrimony engendered by the adversarial process.
Related blog posts:
Court: Client List, Bonus Money is Community Property – In re Marriage of Finby
Covering Children’s College Costs in California Divorce Proceedings – In re Marriage of Humphries
Support Awards and Earnings Capacity in California Divorce – In re Marriage of Lim