Santa Rosa Family Lawyer Blog

In California, the property acquired or earned by either spouse during the marriage, is considered community property. California law mandates an equal split of community property (division of property). While many people are aware that items like houses, cars and other physical property must be divided during a divorce, they forget about life insurance. Life insurance can be a community asset, which is divided based upon the type of coverage.

Term Life Insurance
Term life insurance gives the policyholder coverage for a proscribed period of time, specified by the specific policy terms. Term life insurance tends to be the least expensive type of coverage available, since it will only cover the holder for a limited period. In addition, the premium only pays for the insurance policy. Once the term ends, the holder may renew the policy, but the premiums tend to increase with each renewal, as the policyholder ages.

Permanent Life Insurance
Permanent life insurance tends to be more expensive than term life insurance, because it covers the holder for their entire life, provided they continue to pay the premiums. Most permanent life insurance policies have a set premium that will not increase over the life of the policy. The premium paid is actually greater than the cost of the insurance policy, so the insurance company will often invest the extras. Permanent life insurance offers the possibility of dividends and interest earned from the extra money that is invested. The policy holder may elect to invest the extra income, borrow against case value of the policy, or terminate the policy to receive the cash surrender value.

A person seeking permanent life insurance has several options:

Whole Life Insurance
A whole life insurance policy allows the policyholder to receive coverage during their whole lifetime, provided they continue to pay the premiums. The excess payments from the premiums continue to build as the policy goes forward. A policyholder may then borrow from the cash reserve or later surrender the policy and receive its cash value.

Universal Life Insurance
Universal life insurance provides a more flexible approach than traditional permanent life insurance. Universal life insurance allows a policyholder to change the amount of their insurance, adjust their death benefit, and, accordingly, adjust their premium payments. Universal life insurance policies cost less than a typical whole life insurance policy. Policyholders still retain the ability to borrow or withdraw money from the cash reserve.

Variable Life Insurance
Variable life insurance policies involve the investment of a policyholder's cash reserve into stocks, bonds, and other securities. A variable life insurance policy's death benefit is based upon the performance of the policy holder's investments. Typically, the insurance company will guarantee a minimum return.

Variable Universal Life Insurance
Variable universal life insurance allows a policyholder to change the amount of their insurance coverage, thereby changing both the premium payments and death benefit. It also allows the policyholder to invest the excess money from their cash reserves.

Single Premium Life Insurance
Single premium life insurance policies require only one, up-front premium payment. Once the one-time premium is paid, the policy accumulates cash value and will distribute its proceeds to the policy's beneficiaries.

Survivorship Life Insurance
Survivorship life insurance policies are single policies that cover two people for one insurance benefit. The policy pays out onoly after both of the policyholders die.

Typically, a term life policy is not community property, since its duration is so short, and would not be divisible in a divorce proceeding. However, any whole life policy that accumulates cash value can be treated as community property. As a result, if the policy is considered community property it will be considered divisible during the divorce proceeding.

Business valuation in divorce cases and the distribution of marital property in many divorces can be complicated and the source of much frustration, anger, and contention for both parties. The process is even more complicated if the divorcing couple's community property includes interest in a business. The business interest will often be the most valuable part of the divorcing couple's community property. In addition, the business interest may generate profits and salaries for one or both of the divorcing spouses. The business interest is a part of the community property and, as such, must be divided as part of the divorce. In order to properly divide the community property, the business's value must be determined.

The valuation of a business is not a simple tax, and the use of a professional business appraiser is almost always required. There are several methods to determine business value, and the appraiser will typically select the most appropriate valuation method according to the type of business in question and the information available. Valuation methods fall into three categories: asset approach, income approach and market approach.

Asset Approach
The asset approach determines the business' value by using one or more methods based on the value of the assets minus any liabilities. The asset approach initially seems very simple, however, there are a number of complicating factors. For example, the value of property and equipment can, at times, be difficult to ascertain because their value is not always the equivalent of book value. In addition, assets like goodwill and intellectual property are notoriously difficult to value, because they are intangible. The asset approach is typically relied upon when the business is an investment or holding company, or with very small businesses or professional practices where there is little or no goodwill.

Income Approach
The income approach determines the value of the business using one or more methods that convert anticipated economic benefits into a present single amount. The income approach is the most widely used method for valuing small, privately held businesses. In reaching a business valuation, the expert will collect and review the business' historical financial data, in an attempt to estimate future business earnings. The valuation expert will attempt to determine the future income, along with the risk that the projected income will actually be received.

Market Approach
The market approach determines the value of the business by comparing the business to similar businesses that have been sold. The market approach is very similar to the method used by real estate agents when valuing homes. The difficulty with the market approach lies in finding data about other comparable business sales in the same geographic area. In fact, most businesses being valued are small, privately held businesses, while most transactional information available relates to large publicly held companies, with significant differences in size, sales, profits and geographic location.

While the receipt of your final divorce decree from the court signals the end of your marriage, there is still some work to be done so that you can move on with your life. The following list is not exhaustive, but provides an excellent starting point.

Name Change
Women generally prefer to revert to their maiden name after the divorce is finalized. Filing for an official name change is not difficult, and your attorney will be able to assist you with the paperwork. Of course, once your name change is official, you're still not finished. You will typically need to send or show a copy of your divorce decree to numerous agencies, offices, and companies in order to change your name in every aspect of your life. Remember, you will need to change your name for:

· Drivers license and car registration
· Professional licenses
· Social Security
· Internal Revenue Service
· Insurance companies
· Banks, credit cards, mortgage company, student loan provider, and auto loan company
· Library card
· Magazine and other subscriptions
· Associations and clubs

Estate Issues
Once the divorce is final, you will want to review your will and other estate documents in light of your life changes. Most likely your former spouse is listed as your primary beneficiary, and the divorce will not necessarily change that. An attorney can assist with the drafting of a new will, to ensure that your estate is properly taken care of and your property will pass to those you want. In addition, you will want to change any final directives and living wills as well, so that your former spouse is not making end of life decisions for you. Finally, review your life insurance policy to make sure that your former spouse is no longer your beneficiary, because a divorce will not affect the policy's payout.

Financial Matters
Most married couples have a number of joint financial accounts. It is important to remember that you need to cancel your joint credit cards, and open new credit card accounts in your own name. In addition, you will need to first open a new bank account in your own name and, with your former spouse, close your joint bank accounts. Your divorce decree will most likely state how the bank accounts will be divided, so that should not be a concern at this time.

It is highly recommended that you obtain a credit report six months after the divorce becomes final. The credit report will allow you to make sure that you no longer have any joint accounts with your former spouse.

Insurance
If one spouse has been covering the other on medical insurance through employment, it will be necessary to obtain the paperwork for continuation of benefits through COBRA. The usage of COBRA will allow the non-covered spouse to obtain coverage through their own employer or to obtain individual insurance coverage, depending on their needs and financial situation.