Are Term Insurance Proceeds Community Property or Separate Property

Are Term Insurance Proceeds Community Property or Separate Property

By Marcus Morales on Mar 13, 2018 in Articles, Business Valuation, Divorce, Legal Separation, Property Division

Generally, characterization of a term insurance policy (i.e. life insurance, homeowners insurance, etc.) depends on the source of funding of the premium for the final term of the policy (Marriage of Burwell, 221 Cath at 17, 164 CR3d at 712; Minnesota Mut. Life Ins. Co v. Ensley (9th Cir 1999) 174 F3d 977, 983 (applying California Law)). When the final premium is paid solely with community property, the proceeds of the policy are community property (Logan, 191 Cal. App. 3d at p. 321). Conversely, when the separate estate pays for the final premium with no help from the community, the proceeds are a separate asset.

For example, this issue may arise when a party purchases a house before marriage (separate property) and then the separate property house burns down in a fire during the marriage. If the homeowners insurance policy was paid with community earnings, during marriage, the homeowners insurance policy proceeds should be deemed community property.

This is not legal advice and you should always consult a lawyer. Call Morales Law at (805) 845-5405 for a free consultation with a featured Santa Barbara Divorce Lawyer.

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