California is a community property state. What this means is that (generally) all property acquired by either spouse during the marriage is deemed to be jointly owned by both. Generally, if a life insurance policy has been purchased by one party using “community funds” (i.e., joint funds) during a marriage, it will be considered to be a community asset or community property in the case of divorce. Similarly, the surrender value of a life insurance policy purchased with community funds may be considered community property in California. If a life insurance policy is purchased prior to marriage using separate funds, the policy will generally be considered an individual asset and not community property.
In community property states spousal consent is a legal requirement to withdraw funds from pension and 401(k) plans. What this means is you must seek spousal consent to name anyone other than your spouse as your designated beneficiary under your pension or 401(k) plans. Life insurance differs from this rule though and currently California law does not require an insured to seek spousal consent in a beneficiary designation that names someone other than their spouse as the designated beneficiary of an individual’s life insurance policy.
California law does not disqualify an ex-spouse from collecting proceeds from a life insurance policy where they are the designated beneficiary. Several states prohibit ex-spouses from being named as the designated beneficiary of a life insurance policy following a divorce unless the policy owner has affirmed the ex-spouse as the designated beneficiary after their divorce is finalized. In many cases where couples are without the legal representation, they may forget to update their beneficiary designations following a divorce and the courts have generally deemed an ex-spouse should not benefit from this administrative error. However, because California law does not disqualify an ex-spouse from being named and receiving proceeds if named as the designated beneficiary of a life insurance policy of their ex-spouse, it is very important you have a competent and experienced divorce attorney on your side in order to ensure that all of your interests and desires are properly addressed.
Whether or not your life insurance policy will qualify as community property will depend on a number of factors and will depend on the unique facts of your case. For more than 40 years, the Law Offices of Steven M. Bishop has helped San Diego area residents. His reputation has been built on knowledge, experience and his loyal representation of his clients. If you are contemplating or facing divorce in the San Diego area call us today to learn more about how we can help protect you and your family.