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Life insurance policy deemed community property in Valli divorce

Ohio is an equitable distribution state when it comes to property division in divorce. That's as opposed to a community property state. The difference is significant and can sometimes create major confusion -- the kind that can only be sorted out with the help of skilled legal representation advocating for both partners.

In the 41 states of the country where equitable property division is the norm, it means that assets and debts get divided up "fairly" between the two spouses. Either they have to come to terms about what's fair through negotiations or mediation, or they turn the dispute over to the courts.

In the nine states where community property is the standard, anything that has been purchased during the marriage is considered equally owned and subject to equal division. This can get tricky sometimes. While it has been known to happen, homes are tough to physically split in half. What about life insurance policies and the benefits that may be associated with them?

This was an issue that the California Supreme Court recently was confronted with in the divorce of singer Frankie Valli. Readers may recognize the Valli name. He was the lead singer of The Four Seasons, the Rock and Roll Hall of Fame-enshrined group with such hits as "Big Girls Don't Cry" and "Walk Like a Man."

In 2004, Valli and Randy Valli, his wife of 20 years, separated. One year earlier, he had purchased a life insurance policy that is now worth $3.75 million. It reportedly listed her as the sole beneficiary.

In the course of their divorce, Valli claimed he still owned half the policy. At that time, it was valued at $365,000. The judge in their divorce agreed and declared that Valli could reclaim ownership of the policy by paying his wife half the value -- $182,500.

An appeals court reversed that ruling, saying she was the sole owner of the policy, but the state's high court upheld the original decision. The court said the policy had been bought with community assets and that Valli had never relinquished his share of the policy in writing as required by a 1984 law.

The attorney for Randy Valli says that even though his argument didn't hold sway, the clarity provided by the court will likely be welcome by family law practitioners in the state.

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

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