California is a community property state, which means that assets acquired during a marriage are split 50/50 in the event of a divorce. This law may seem pretty clear-cut, but what happens to assets such as life insurance policies? Singer Frankie Valli recently set a new precedent when the California Supreme Court recently ruled in his favor regarding a life insurance policy he purchased for his then wife.
Valli, age 80, and his wife were married for 20 years before their separation in 2004 and subsequent divorce. They had three children together. After suffering heart problems, Valli bought a $3.75 million life insurance policy for his wife. Even though the life insurance policy was in his wife's name, Valli still owned half of its value. In 2004, it was worth $365,000.
Valli, who scored huge hits with the group the Four Seasons, used money from a joint bank account to purchase the insurance. That means that he is considered joint owner of the policy under California law. The Rock and Roll Hall of Famer would have had to relinquish his right to ownership in writing based on a 1984 law. Before 1984, a spouse could give up his or her rights to marital property through an oral agreement.
Property division can be tricky to navigate in a divorce. Although California law mandates that divorcing couples split assets 50/50, not many couples would think to split a life insurance policy intended for one spouse. The results of this case will likely set a precedent for other divorcing couples in the nine community property states.
Source: SFGate, "Frankie Valli wins divorce case in California Supreme Court" Bob Egelko, May. 16, 2014