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Confusion over California's community property laws

Divorcing couples in the Auburn area and throughout California must decide upon many issues when going through the divorce process. While certain matters related to child custody and alimony may be negotiated or decided by a judge, matters related to the division of property are largely dictated by state laws.

California is one of nine states with community property laws. In community property states, each spouse is entitled to a 50 percent share of anything that is purchased or earned during the course of a marriage.

In divorce cases, spouses may contend certain purchased items or earned assets fall outside the legal perimeters covered by California's community property laws. One such case recently went all the way to the California Supreme Court and involved a life insurance policy purchased by famed Four Seasons front man, Frankie Valli.

Frankie Valli and his wife Randi officially separated in 2004 and subsequently divorced. At issue in the divorce settlement was a $3.75 million dollar life insurance policy purchased by Valli in 2003 for $365,000. While Valli's wife Randi was deemed the sole benefactor of the policy, Valli's divorce attorney argued during the couple's divorce proceedings that, under California’s community property laws, Valli was entitled to retain a 50 percent share of the policy.

The court agreed, citing that California's community property laws entitled Valli to retain 50 percent of the policy and allowed the singer to buy out his ex-wife for half the $365,000 purchase price. An appeal of the lower court's decision, however, resulted in the original ruling being overturned as the appellate court reasoned that the policy was purchased in Randi Valli's name and named her as the sole benefactor.

The legal dispute was recently laid to rest with the California State Supreme court overruling the appellate court’s decision, citing a 1984 amendment to the state's community property laws requiring "written agreement to give one spouse sole ownership of something bought with marital funds." When deciding the Valli case, the court noted the lack of a written agreement.

As the Valli divorce case illustrates, matters related to property division in California are not always clear. It's important, therefore, that individuals who have questions or concerns related to what are and are not considered to be marital assets, consult with a divorce attorney who can help successfully resolve disputes.

Source: San Francisco Chronicle, "Frankie Valli wins divorce case in California Supreme Court," Bob Egelko, May 16, 2014

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