When California couples are going through a divorce, there are several issues that they must typically reach an agreement about. When dealing with issues regarding property division, courts typically refer to state laws that govern whether the state is a community property state like California or an equitable division state like the majority of states. However, certain assets may be handled differently due to the type of asset that they are.
Life insurance policies sometimes have a cash value and sometimes they do not. Generally, permanent life insurance policies usually have a cash value. These policies are often subject to property division, and a judge may order the couple to equally split the value of the policy. Term life insurance policies do not usually have a cash value until the insured dies. Therefore, couples do not usually have to split these types of insurance policies, and a person can change his or her beneficiary after the divorce.
Some couples may be able to reach an agreement or have a judge order a life insurance policy to be handled in another manner. For example, if one of the spouses is a stay-at-home parent and will retain custody of the children, the couple may agree to keep insurance as it currently is so that the spouse will have funds available from a term life insurance policy to help support the children if the other spouse predeceases him or her. In some cases, a spouse may turn over ownership of a policy so that the other spouse gets the insurance coverage and takes over the premium payments.
Couples who are divorcing may have to seek valuation of certain items, such as marital property, artwork and business assets. Sometimes retirement accounts, bank accounts and insurance accounts may need to be assessed so that a family court can properly valuate these items. Family law attorneys often help with the process of reaching agreements regarding property division.
Source: Fox Business, “Don“, Jack Hungelmann, May 06, 2013