The California Supreme Court overturned an Appeals Court decision to affirm that large gifts not in writing must be divided as community property.
Recently the California Supreme Court released a case about life insurance and gifts, Marriage of Valli, 2014 DJDAR 6077. The traditional rule in divorce circles is that generally we only talk about life insurance if it has a cash-out value. Unless you plan to call expensive experts to the stand (and you have a very valuable policy perhaps with an uninsurable spouse) we don’t bother with discussing the value of life insurance that is term in nature.
In this case the trial court instructed one spouse to buy the other person out at half the cash value of the policy. Upon appeal, in this decision was reversed based on the argument that the policy had been a gift from one spouse to the other. Upon further review, the Supreme Court reversed the Court of Appeal, finding that the policy was not a gift but community property.
What is interesting about this case is it is a rare discussion of California law which requires that ‘large’ gifts between spouses be in writing with clear intention to make it the other spouses separate property and not community property. It is also an interesting discussion because it has in it a very interesting discussion of the type of issues that can come up if expensive art and jewelry and other personal property is purchased during the marriage.
As the California Supreme Court notes, it is not uncommon for spouses to buy very expensive jewelry not only for investment purposes but for purposes of handing them down to future generations. Although the item might be used on special occasions, the primary purpose of the item would be to be passed on to the later generations or used as an investment. This practice goes back thousands of years in world history. Particularly in areas of the world where there is religious, political, or economic turmoil, having such tangible assets also creates a safety net in cases of extreme upheaval.
We adopted the rules requiring a writing for substantial gifts because the state legislature was concerned in 1984 that it was creating extensive litigation and dissolution proceedings by allowing large oral gifts. This practice encouraged spouses (or their divorce lawyers) to transform a passing comment into an agreement or even to commit perjury by manufacturing an oral or implied transportation.
In this particular case, the wife made an extremely technical argument and failed. Her argument was that because her husband purchased this policy from a third party and put it in her name at time of purchase, the normal rules requiring a written gift for this policy to be her separate property would be avoided.
One of the difficulties that we have in divorce court (aside from perjury) is that we have a number of very good rules in California law for different reasons and in a divorce they can collide.
We have a rule that if somebody’s name is on title that’s their property. We have a rule that if property is obtained during marriage it is community property. We have a rule that if community property is used to purchase an asset it is community property. We have a rule that if one spouse gets taken advantage of there is a presumption that they were under undue influence. Now add finally a rule that big gifts during the marriage have to have a writing that shows that a gift was intended.
In this case I am happy to see that common sense prevailed. The greedy spouse did not get to grind the ill spouse out of an extra $91,000. Family law is all too often an attempt by one side to get that which is unfair. The extent to which people rationalize their behavior is astounding.
