I’m getting divorced, is a life insurance policy considered community property?
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Asked April 23, 2012
Getting a divorce opens up a lot of legal questions, and life insurance policies are often hotly debated. In some cases, the policy is not considered community property, but it may belong to either party, while in other the policy is community property and must be divided accordingly. More commonly, there is a combination of ownerships, and the community may or may not be entitled to any portion.
The first thing that needs to be pointed out is that not all states use community property laws in settling divorce disputes. You can contact your state department of insurance to clarify this in your state of residence, or talk with your divorce lawyer. If the answer is no, then the question will not be an issue, but if your state does use community property laws, there are other considerations which need to be addressed.
If the life insurance policy was initially purchased before you got married, and you have maintained it separately since being married, the policy is not thought of as part of the community estate. If the policy has been paid for out of joint funds since you got married, then the portion of the policy paid out of your community funds will be considered community property.
The deciding factor, once community property laws have been identified, is always going to be who paid how much into the policy. Getting a divorce will not transfer ownership of the policy unless that is part of the divorce agreement. By default, you will keep what you have paid for out of your own income, your spouse will be entitled to any money they have paid into it, and community property only applies to the portion of the policy that was paid for out of your family's collective income.
Answered April 23, 2012 by Anonymous