“Oh, What a Night!”
That’s the line from the famous song by Frankie Valli and the Four Seasons, and it is also the line that the winning party may want to be singing after last week’s major Family Law decision by the California Supreme Court.
That’s because the winning party is Frank Valli, further made famous in the musical “Jersey Boys”.
In a 7-0 decision, the State’s highest court ruled that simply looking at the person who is listed on an asset, such as a life insurance policy, does not determine at divorce whether the asset is community property or that person’s separate property. It’s more complicated that that.
In this case, before he got divorced, Frankie Valli bought a life insurance policy and made his wife the sole owner and beneficiary. The parties later separated.
At trial, the insurance policy had a value of over $360,000.00. The trial judge said that even though the policy was in the wife’s name, it was community property because it was acquired during marriage and because community property had been used to pay the premiums. Since the policy was community property, not separate property, the judge also had to decide which spouse would receive the policy. The judge decided the husband would get it, which meant that he had to pay $182,500.00, which was one half of what the cash value of the policy was at the time of trial. Had the wife won, the policy would have been characterized as separate property and she would have received all $360,000.00.
The wife appealed to the Court of Appeal, and won. The Court of Appeal recognized the general rule that property acquired during marriage is, in most cases, community property. But the Court of Appeal also said that another, more specific rule governed the outcome. The specific rule is that if only one person has title to an asset, that person gets the asset and the asset is not community property.
The Court of Appeal recognized that the form of the title usually does yield to the general rule that looks simply to see if the asset was acquired during marriage. But, the Court of Appeal said, this yielding only occurs if title was put in one person’s name because of a transaction between the spouses themselves, like when a spouse is added to the title on a house that the other spouse already owns (as opposed to a spouse and a third party such as an insurance company, which was the situation in the Valli case). This is because of the fear of undue influence that arises when one spouse gives something of value to the other.
The Court of Appeal is the “intermediate” court in California. That means the Court of Appeal can overrule the trial court, but the Supreme Court can, in turn, overrule the Court of Appeal. And that is what happened in this case.
In its decision, the Supreme Court said that even when third party transactions are involved, it takes more than putting title in one person’s name to overcome the general rule that property acquired during marriage is presumptively community property. The seven justices said that California’s transmutation statute must also be followed. That means if an item is acquired during marriage, it will almost always be community property unless there is “an express declaration that is made . . . by the spouse whose interest in the property is adversely affected” and the “adversely affected” spouse expressly states that the character or ownership of the property is being changed.
In this case, Frankie Valli presumably did not do these things. So even though he arranged for his wife to be the owner of the life insurance policy, he has a new lease on life.
As for the wife, I could say that “Big Girls Don’t Cry”. But that’s another song by Franki Valli and the Four Seasons, so I won’t go there.
But I am going to New Jersey this summer.