Term Life Insurance Since in Re Marriage of Burwell (2013)

JurisdictionCalifornia,United States
AuthorR. Ann Fallon
Publication year2016
CitationVol. 38 No. 4
Term Life Insurance Since In Re Marriage of Burwell (2013)

R. Ann Fallon

Ann Fallon has practiced law for 31 years and is a frequent writer and contributor on employment and retirement benefits issues. She has been a Certified Family Law Specialist since 1997 and is a Fellow of the American Academy of Matrimonial Lawyers. She serves as the Administrative Chair of the QDRONES, who are all professional QDRO preparers. She received the 2015 Fellow of the Year Award from the American Academy of Matrimonial Lawyers, Northern California Chapter. She received the 2009 Hall of Fame Award from the Association of Certified Family Law Specialists, and received the Honored Fellow Award from the Northern California chapter of the American Academy of Matrimonial Lawyers in 2008. She writes for Continuing Education at the Bar and received the Spirit of CEB writer's award for Family Law in 2007.

Advice to Client—"Regarding Your Term Life Insurance ..."

1. Advice to Client: Disclose Term Life Insurance Policies: The Schedule of Assets and Debts, Judicial Council Form FL-142 at page 2 Section 10 is misleading according to the Appellate court in Burwell because it limits disclosure to LIFE INSURANCE with cash surrender or loan value. Mr. Burwell's attorney explained to the court that TERM life insurance has no value—which is why Mr. Burwell did not disclose his $1 million term life insurance policy. The Burwell court was not impressed. It asked, rhetorically, "which is more authoritative, the disclosure statute or the Judicial Council form?" See In re Marriage of Burwell, 164 Cal.Rptr.3d 702 (2013).

Anyway, term life insurance may have value:

  1. The payoff is a large tax-free death benefit
  2. The Insured may be impaired with no further Insurability giving value to the present policy.
  3. The term policy may be convertible to a permanent policy, which would continue until the insured's death. Expensive, but worth it if health of insured is impaired.
  4. There may be value on the Viatical Settlement Market if the insured is health impaired.
  5. The IRS also has a Perception of Value if, for example, the policy is being transferred to the insured's estate.

2. Advice to Client: Change your beneficiary after the Judgment awarding your own policy to you. A life insurance QDRO can require a former spouse or child to be the beneficiary on your life insurance. But if there is no such QDRO and the Policy is yours and you wish to change your beneficiary, no court order can do that for you. Look at the young police officer in In re Marriage of Ortiz. He finally married the woman who had borne him two children, but he neglected to remove his former spouse as his life insurance beneficiary. A few weeks after the wedding, he was shot dead. Former spouse got the life insurance proceeds. See In re Marriage of Ortiz, 9th Circuit 2008 U.S. App. LEXIS 16421 (2008).

TIP: Change your life insurance beneficiary after Judgment awarding your policy to you:

  • You must take the steps the Plan or Policy provides to designate a change of beneficiaries.
  • The court order cannot "unmake" your prior beneficiary designation.
Advice to Judgment Drafter:

1. Include well crafted waiver of ex's interest in the other party's life insurance:

Client is awarded client's own life insurance policy.

Client may forget to change beneficiary designation notwithstanding your best efforts. Is there something else you can do to help protect your client's life insurance proceeds from going to an ex-spouse who should not have beneficiary status after the final Judgment? YES—WAIVER LANGUAGE.

[Page 14]

  1. What is good Waiver Language: See Meherin v Meherin (1950) 99 Cal. App. 2d 596; Life Insurance Company of N. America v. Cassidy (1984) 35 Cal. 3d. 599 and In re Marriage of Ortiz (2008) 535 F.3d 990.
    1. Waiver must name the plan,
    2. specifically waive the beneficiary designation, and
    3. promise to sign whatever is necessary to effect the waiver.

    If ex does not waive or disclaim the benefit at the other spouse's death, the family court reserves jurisdiction to employ an action in constructive trust.

  2. PRACTICE NOTE: If you go the extra mile and actually get those beneficiary change forms for your client and exercise oversight to make sure your client executes and delivers those forms, you may be setting a precedent that you have to follow in every case. Query whether that is a burden you can meet.
  3. PRACTICE NOTE: Employee may not need a stamp. Plans may allow Employee to go on line to...

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