A marriage’s asset is life insurance. Assets obtained during a marriage in Texas are normally considered community property, which means they belong to both spouses. Even if they are not the intended beneficiary, a spouse may have a claim to life insurance proceeds in rare cases.
What if, on the other hand, the marriage is based on common law?
The same community property analysis is used in most cases.
Even though they are not the named beneficiary, the surviving spouse may be entitled to half of the proceeds if the property was purchased after the marriage was created.
Are life insurance proceeds considered community property?
California is a state that recognizes community property. All property obtained during a marriage is assumed to be community property. 760 of the California Family Code. Separate property, on the other hand, is property acquired prior to marriage, after separation, or during marriage as a gift or inheritance. 770 (California Family Code). The legal notion of transmutation, on the other hand, can modify the character of property (whether separate or common). Married couples can shift separate property to community property, community property to separate property, or one spouse’s separate property to the separate property of the other spouse by a transfer or agreement. 850 of the California Family Code. To do so, they’ll need a signed document that specifically indicates that the property’s ownership is changing. 852 of the California Family Code.
The California Supreme Court declared in one of the most important family law cases of 2014 that an insurance policy obtained by a husband during marriage and named his wife as the policy’s sole owner and beneficiary was community property upon the couple’s divorce.
Randy (Wife) and Frankie (Husband) Valli had been married for twenty years. Frankie was compelled to go to the hospital for “heart troubles” during the marriage. While he was there, he told Randy about his intention to purchase a life insurance policy to protect his own life. During this conversation, Frankie said that Randy would be the policy’s owner. Frankie utilized community property assets from a shared bank account to buy a $3.75 million life insurance policy on his own life before the couple divorced in 2003. He listed his wife as the only owner and beneficiary of this policy. Frankie later testified that he assumed Randy would look after the kids and provide them with the support they required. He also maintained that he had no intention of divorcing Randy when he bought the policy. Frankie paid the insurance premiums with communal property monies from a joint bank account up until the day of separation.
The insurance policy had a cash value of $365,00 at the time of the divorce trial.
The divorce court had to decide whether this policy belonged to the wife as distinct property or if it belonged to the community. Because the policy was purchased using shared monies during the marriage, the divorce court concluded that it was community property. The divorce court found in favor of husband’s divorce counsel, awarding him the insurance and ordering him to pay wife $182,500, or one-half of the policy’s value.
The wife’s divorce lawyer filed an appeal, and the California Court of Appeals overturned the divorce court, declaring the policy to be independent property of the wife. The ruling of the Court of Appeals was subsequently appealed to the California Supreme Court by the husband’s divorce lawyer.
Randy’s divorce lawyer argued in front of the California Supreme Court that the policy was her distinct property because it was purchased for her and she was the only owner of the property. Her divorce counsel claimed that by transferring the policy to her name, her husband changed the policy’s status from community to separate property. The divorce lawyer said that the requirement of a written change of ownership transmutation only applies to transactions between spouses and not to one spouse’s purchase of property from a third party. Her divorce counsel contended that when her husband bought the insurance policy from the corporation and put it in her name, it constituted a third-party purchase. Her divorce lawyer claimed that the transmutation criteria did not apply because there was no interspousal transaction. Randy’s divorce lawyer also argued that the policy was her separate property under Evidence Code 662’s title presumption. “The owner of the legal title to property is deemed to be the owner of the entire beneficial title,” the statute declares. Randy’s divorce lawyer said it was her separate property because she was the owner.
Frankie’s divorce lawyer, on the other hand, maintained that the policy was community property because it was bought with shared funds during the marriage. His divorce counsel claimed that the criterion that a change in ownership be in writing was not met, and therefore no transmutation took place. He claimed that simply placing his wife’s name on the policy did not make the property her distinct property.
The California Supreme Court sided with the husband’s divorce attorney and overturned the Court of Appeals’ ruling. The California Supreme Court considered whether the transmutation statutes applied to cases where purchases were made from third parties, the legislative objectives of the transmutation statutes, and whether Evidence Code 662’s title presumption doctrine applied in these circumstances in reaching its decision that the life insurance policy was community property.
When determining whether transmutation statutes apply when community funds are used to buy property from a third party, the Court explained that if the purchase is of a personal nature and not of significant value, given the couple’s financial situation, the property would be given as a gift and would not be subject to transmutation statutes. However, if the acquisition is of significant worth in light of the couple’s financial condition, it will be considered an interspousal transaction and will be subject to the conversion regulations. Even after the gift was made, the property would remain community property until the giver of the property made a written declaration specifying modifying the character of the property. The Court rejected the argument that spousal purchases from third parties did not require a legitimate conversion if the transaction was of significant value in light of the couple’s financial position.
If the parties’ objective was to convert community property money into separate property, as Randy’s divorce lawyer asserted, the transaction had to involve a gift from husband to wife, as nothing was ever transferred to husband for his common interest in the asset. If the policy was given as a gift, it would be considered an interspousal transaction, and the laws of transmutation would apply in the event of a divorce.
The Court used an example to demonstrate how a husband and wife in this case could have quite different perspectives on why the policy was obtained. The policy could have been obtained as an investment or for the benefit of the couple’s children, according to the husband’s divorce counsel. He could claim that he and his wife came to an agreement that the policy would remain communal property. On the other side, the wife’s divorce attorney could say that there was never any discussion about using the policy as an investment or passing it down to their children. Her divorce lawyer might be able to show that the coverage was intended for her alone. This back-and-forth debate would force the divorce court to evaluate the parties’ credibility on the purpose of the life insurance policy purchase. In terms of why the policy was obtained, the divorce court would have to determine whether to believe the husband or the wife. The transmutation statutes, according to the Court, were created to avoid putting the divorce court in this position, to eliminate needless litigation, and to prohibit the admission of unreliable evidence. Transmutation statutes were created to provide clarity to the divorce court about the parties’ intentions.
The California Supreme Court explained that it did not need to determine whether Evidence Code 662 ever applied to divorce proceedings in order to address the wife’s claim that the life insurance policy was her separate property because of the presumption (that the owner of legal title is presumed to be the owner of full beneficial title). Although the Court assumed that Evidence Code 662 would be applicable at times, it found that it does not apply to the extent that it interferes with the transmutation statutes.
“For the reasons we have given, the transmutation requirement of an express written declaration applies to Wife’s claim in this marital dissolution proceeding, that the life insurance policy Husband purchased during the marriage with community funds is her separate property,” the California Supreme Court concluded. Wife does not claim that she produced sufficient evidence at trial to meet the specific declaration requirement, and our review of the record reveals no such evidence. Husband never stated in writing that he relinquished his communal interest in the policy purchased with public cash. As a result, we concur with the trial court’s assessment of the insurance policy as communal money.” Valli v. Valli, 58 Cal.4th 1396 (California 2014).
The Court made it plain in this divorce case that purchases acquired during the marriage, even from third parties, are community property and subject to conversion legislation if they are of a personal nature or if the value of the purchases is significant given the couple’s financial situation. Small gifts from one spouse to the other are presumed to be the independent property of the receiving spouse after they are delivered, as long as the amount of the present is not significant in light of the couple’s financial situation. If the gift is significant, the giver will need to sign an express statement transferring the property to the receiving spouse as the sole owner.
Valli v. Valli was a landmark family law decision in 2014, and it will undoubtedly be discussed or analyzed in many future property characterisation discussions or analyses in divorce cases.
Are life insurance proceeds separate property in Texas?
A contract between an insurance company and the insured is known as a life insurance policy. However, because a life insurance policy is usually governed by contract law, the seas of asset division in a Texas divorce are a little murkier than usual. Any payments made to a life insurance policy premium during the marriage are generally considered communal property in Texas. This means that if the couple divorces, the premiums can be shared between them, with the policy proceeds going to the policy’s beneficiary. Ex-spouses’ designations as policy beneficiaries are usually ineffective in Texas unless a post-divorce order identifying the ex-spouse as beneficiary is filed. When it comes to classifying funds from a life insurance policy, Texas has a unique (and sometimes difficult) law known as the “inception of title” rule. The source of funds for the initial policy premium determines who owns the life insurance policy. Even if some/all subsequent premiums are paid with community property funds, the policy remains separate property if it was paid before marriage or with amounts clearly traceable to separate property (a.k.a. money or income made during the marriage). This means that upon death, the policy’s full value will be distributed to the dead spouse’s estate/beneficiary. The community estate, on the other hand, has a claim for reimbursement of the policy’s value that can be linked to the use of community money to pay premiums.
Can an ex wife be a beneficiary on a life insurance policy Texas?
Life insurance is a common instrument for family planning that pays money to a beneficiary in the case of the policyholder’s death. In the event of the first spouse’s death, one spouse names the other spouse as the beneficiary to ensure that the surviving spouse gets money for burial and living expenses. However, divorce occurs, and if the deceased ex-spouse had life insurance, the living ex-spouse was very certainly mentioned in it. However, there are rare exceptions in Texas, where an ex-spouse is not compensated as a beneficiary under a life insurance policy after the divorce.
What is not considered community property in Texas?
Unless a spouse can prove (or the spouses agree) that something gained during the marriage is distinct property, everything acquired during the marriage is communal property. Property acquired before marriage as a gift, through inheritance, or as part of a personal injury settlement is referred to as separate property.
- Contributions to a spouse’s retirement account made before to the marriage;
- A personal injury payout for a husband following a car accident in which he was harmed.
Reimbursement: Separate property includes a house or car purchased before the marriage. However, if the non-owning spouse paid for the other spouse’s separate property with community funds after the marriage, the non-owning spouse is entitled to compensation for the money spent.
What is not community property?
Assets possessed by either spouse before to the marriage or acquired after a legal separation are not considered community property. During the marriage, gifts or inheritances received by one spouse are also excluded. The burden of any debts incurred before to the marriage is not shared.
Does your spouse have to be your life insurance beneficiary in Texas?
Texas is a state that recognizes community property. Property acquired during the marriage with shared resources (community property states) “The term “community funds” refers to property that belongs to the entire community. (Anything purchased with only personal funds, such as items purchased before to the marriage, is not included.) “distinct property.”) Both spouses share ownership of community property.
A life insurance policy obtained during a marriage is communal property in the context of life insurance. Because it is paid into with community funds, a policy is community property, and the surviving spouse will have a community property claim. There are two types of life insurance policies, each of which is influenced by community property rules in distinct ways:
- Term life insurance is a type of policy that covers you for a set period of A term-life policy is one that lasts for a specific amount of time, such as ten years. This policy is community property if it was purchased with shared funds, and your spouse is entitled to the proceeds. If your Texas term-life insurance was purchased during a prior marriage, the policy may be considered community property, and your ex-spouse may be entitled to one-half of the proceeds.
- Policy that covers all aspects of one’s life. A whole-life coverage lasts until you die, and premiums are paid on a regular basis. This policy is community property if it was purchased with shared funds, and your spouse is entitled to the proceeds. If you had a whole-life insurance policy from a prior marriage, your ex-spouse may be entitled to a portion of the proceeds based on the percentage of premiums paid with community funds from that marriage.
When you purchase a policy while single, it becomes your separate property and is not subject to Texas community property laws. You do not have to name your spouse as a beneficiary, and your spouse does not have to agree with your choice. If any of the premiums are paid with community funds, your spouse may be entitled to a portion of the proceeds.
Does a spouse automatically inherit everything in Texas?
If a spouse dies without leaving a will, the intestate succession rules of Texas govern who inherits the estate.
- If there is a husband and children, the spouse receives one-third of the estate, while the children receive the other two-thirds.
- If the marriage had a spouse and children, the surviving spouse inherits everything.
- If the decedent had children from a previous marriage or relationship, the children are entitled to half of the community property, while the surviving spouse is entitled to the other half.
Does wife get everything when husband dies in Texas?
I give you a lot of credit if you and your spouse are trying to get your estate planning and finances under order. Nothing is more difficult than confronting your thoughts and anxieties about the likelihood of either you or your partner dying suddenly. It would be a major error for your family to add to the pain that will be connected with one of you dying away by failing to have a will or other estate planning measures in place. In a situation like the one your family would face if you were to pass away, the last thing any of you would want to do is worry about your finances or who gets what now that one of you has passed away.
One of the most rewarding aspects of being an estate planning attorney is the ability to assist members of our community in better preparing for life after an untimely death or for end-of-life conditions in general. Without intending to be morbid, every single one of us will die at some point. In situations like this, our attention should be on what we do to prepare for that possibility between now and then. Estate planning lawyers are in a position to inquire about a client’s life, such as yours, in order to discover areas that may require attention and to assist you and your family in getting to where you need to be. Again, near the conclusion of someone’s life, you want to focus on that person and what they meant to you, not on any financial concerns about their death.
Can you do anything to the ownership status of your property to avoid probate when you or your spouse die?
After you pass away, your loved one must either probate your state or your will, or the other way around. Going through the probate procedure, like with anything involving the courts, will require you to spend time, money, and energy obtaining court approval for something rather routine in your everyday life. Paying money to loved ones, changing the title on a vehicle, or even selling a home are examples of humdrum steps. Despite the fact that these are all rather routine actions, depending on your family’s situation, going to the courts in the probate process may be necessary.
Probate is essentially synonymous with title transfer. There are a variety of ways to own property such that it will automatically go to a family member or spouse after you pass away. This is true even if you do not have to go through probate. In Texas, there are two types of property. Personal property is the first. We think of personal property as things like furniture, clothes, a car, or even a savings account. Real estate, on the other hand, refers to your home, investment properties, and similar items.
Furthermore, anyone who has been through a divorce in Texas will tell you that there are two types of property. Separate property is the first. Any property that you or your spouse possessed before you married is considered separate property. A gift or bequest given to you or your spouse separately during your marriage would be recognized as separate property. Community property, on the other hand, would be any property gained during her marriage. For example, money earned from your job would be considered Community property even if it was deposited in a bank account distinct from any that your spouse has access to. All property is believed to be community-owned in a divorce or end-of-life circumstance. Additional documentation would be required to show that the property is privately held rather than being part of a community.
Your estate is made up of all of the categories of property outlined above. You and your spouse share equal ownership of any property in your communal estate. Your spouse owns half of the common estate, while you own the other half. Only one half of the community estate can be handed away when you or your spouse dies, because the other half is still owned by whichever of you or your spouse is still alive. It’s also possible that, in addition to their 1/2 part of the common estate, the spouse who dies has a separate inheritance. After then, the separatist state would have to be divided among your children or other beneficiaries.
Finally, even if you are married, you or your spouse can possess separate property. A single person’s property would technically be recognized as distinct property. Any separate property you possessed prior to your marriage, on the other hand, would continue to be categorized as separate property even after you married. Property acquired during the marriage, whether by gift or inheritance, is still considered distinct property.
What happens if you or your spouse pass away without a will?
If you or your spouse died without a will, the state of Texas will decide how your assets are distributed by applying state law to the situation. A decedent is the legal term used to designate someone who dives. When you or your spouse passes away, the surviving spouse is likely to be the major beneficiary of a will or intestate distribution. Death without a will is referred to as dying intestate.
Consider the case where your spouse dies without leaving a will. If you have no other children or descendants, Texas law states that their Community property will go to you. In the alternative, even if you have children, if all of your spouse’s children are also your children, you will receive all of their Community property. Finally, if your spouse had children with more than one person, you would keep half of your spouse’s common estate, and the other half would go to the other children.
What happens if you or your spouse pass away with a will?
If the will you have in place is found to be legal by the probate court, it will be that document that governs how your loved one’s estate is handled after he or she passes away. The problem is that in order to change the title to some types of property, they must go through the probate process. You’d have to apply to the probate court in the county where your spouse resided or died to be admitted to their world of probate. The court would have to examine the will and determine whether it is valid as the first stage in the procedure. If this is the route you intend to take, I recommend checking the county clerk’s website to see what the costs of filing an application with the probate court are.
Many people are startled to hear that you cannot file this application without the assistance of an attorney in most probate courts. Hiring an attorney will undoubtedly increase the costs of probating a will. By completing documentation on time and following the court’s deadline, an attorney can help you prevent mistakes and speed up the procedure. In addition, I’ve worked with a number of persons who have attempted to save time and money for their family by seeking to move property or assets in such a way that the will does not need to be probated. Owning your home under a right of survivorship arrangement, where the property automatically passes to the spouse who survives, is an example of this.
What is a transfer on a death deed?
The ability to use a transfer on death deed to help donors avoid having to go through probate to transfer property after their death is a relatively new development in recent years. The transfer on death deed, in particular, would allow your spouse to choose a beneficiary who would inherit any property listed in the deed when your spouse died. Keep in mind that the transfer on death deed must be documented in their home county’s deed records prior to your spouse’s death.
After a transfer on death deed is completed, you can continue to live in your house as long as you are alive. Your spouse, for example, may be able to stay in the house once the transfer on death deed is completed. Your husband would remain the only owner of the property, which means you would all be responsible for paying taxes and maintaining it. Nothing is preventing you from selling your home. Keep in mind, however, that if the house is sold, whoever is named as the beneficiary in the transfer on death deed will receive nothing when your spouse passes away.
Keep in mind that the transfer on the death deed will take precedence over your will. For example, if your will states that your vacation home will go to your daughter and your transfer of death deed names your nephew as a beneficiary in the lake home, then your lake home will go to your nephew regardless of which document came into being the first period you would then be able to transfer title to the lake home without having to go through probate the first period any property that is classified as real estate regardless of whether or not it has a monetary value will go to your nephew regardless of which document came into being the first
How do pre-marital agreements work in this setting?
You have made a prenuptial or premarital agreement if you are going to marry and have prepared a prenuptial agreement that states that particular property will stay your independently owned property even after you marry. Unless they indicate that if you die, that property will go to someone else and that the property stated in the prenuptial agreement would not be given to your surviving husband.
What is a joint tenancy?
A shared tenancy occurs when more than one individual owns a piece of property. A joint tenancy can be used to own both personal and real property, though you’ll hear about joint tenancies in relation to real estate much more frequently. As joint tenants or joint tenants with right of survivorship, you and your spouse can own property together. If your spots died in a joint tenancy, their half of the property would pass to their heirs or to anybody nominated in their testament. When your spouse dies in a joint tenancy with right of survivorship, their portion will transfer directly to you. These contracts are made in writing.
If your spouse had children who were not your children, their half of the Community property does not automatically fall to you when your spouse dies under a written survivorship arrangement. According to Texas law, you and your spouse might arrange in writing that when one of you dies, all or part of your Community property will belong to the surviving spouse. A right of survivorship agreement is what it’s called. If you and your spouse came to this agreement, you’d have to submit it with the county court where you all live.
The advantage of this form of agreement is that it allows you and your spouse to ensure that all Community property included in the agreement is automatically transferred to the other spouse without going through probate. Remember that this form of arrangement is only necessary or important if you and your spouse have children from a previous relationship. This type of arrangement isn’t necessary if none of you had children from previous relationships.
Bank accounts
There are two different sorts of joint bank accounts. If all of the parties to a joint bank account are living together and the account is set up in either your or another person’s name, either of you can withdraw money from the account without the approval of the other. If the account is set up in both of your names, however, one of you will require the other’s consent to access the funds. In most marriages, obtaining money from jointly held bank accounts between you and your spouse does not necessitate the approval of the other.
One of the most often concerns that estate planning attorneys get is about the advantages of a payable on death account. Another way for you to hold financial accounts is through this strategy. When you die, a payable on death account automatically belongs to your spouse or another person. Also, it is possible to avoid probate. Payable on death accounts are not joint accounts because you are the sole owner of the account while you are alive. When you pass away, however, the person you designated as the account’s owner automatically takes over. Payable on death accounts are simple to open and involve only a phone call to your financial institution or bank.
Life estates in real property
The final topic I’d like to revisit with you today is R life estates in real estate. A life estate gives you or your spouse the right to live on or use the property for the rest of the owner’s life or until he or she passes away. The property is owned by someone else in these cases. You or your spouse would only have an ownership stake in the property if you or your spouse were still alive. To bypass probate, many people establish life estates. For example, you may create a life estate for your spouse after your death, allowing him or her to utilize the property as long as they lived. However, in your will, you would simply specify that the property will be given to your children or to anyone you choose as the beneficiary.