The California Supreme Court Agrees with Frankie Valli: “Big Girls Don’t Cry”

In an echo of the famed singer’s long-ago hit, Frankie Valli’s former wife may be crying, as she lost her bid to deny Frankie his community property interest in a life insurance policy.   Imagine, paying the premiums on a life insurance policy with community funds, building a cash value and then when sick ensuring that your spouse will have no problems upon your death by naming her the sole owner and beneficiary of this policy.  But, before death occurs, divorce beats you to the punch.  Now, that gesture of good planning is used against you in a bid to deny you your property interest in a valuable life insurance policy.  Seems unfair?  The California Supreme Court agrees.

After a 20-year marriage, Frankie Valli, and his wife, Randy Valli, separated and subsequently divorced.  Before the separation, Frankie used community property funds from a joint bank account to purchase a life insurance policy.  Frankie named Randy as the sole owner and beneficiary of this policy. The issue:  is the cash value of this policy community property or Randy’s separate property? Randy claimed that because she was named as the owner of this policy, despite the fact community property funds were used to pay the premiums and build cash value in the policy, it was her separate property. 

This case has caused much dismay among family law practitioners. The fear in the family law community was that if an asset is placed in the name of a spouse without the other party intending to waive his or her interest in the asset by complying with the legal requirements for such a waiver to occur, the resulting conflict in the form of title could circumvent long-time legal precedent in family law aimed at preventing a simplistic property award.  After a long wait, we finally have a ruling from the California Supreme Court.  The Supreme Court held that title alone to the policy, if the other party had not met the legal requirement to essentially waive their rights in the policy, is not sufficient to deem the policy as separate property.

The lesson to be learned:  in family law, title to an asset does not always determine the character of the asset (i.e., community or separate property).