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California “Community Property” Law Affects Life Insurance Beneficiaries

Generally, if something happens to you and you die, (assuming the conditions of your life insurance policy have been met) your life insurance death benefit is paid out to the primary beneficiary named on the policy. But in community-property states like California, your spouse may have community interest in your life insurance policy payout even if he or she isn't the named beneficiary.

Here's what you need to know about California's community property law.

What Counts As Community Property?

Community property is any property that is bought or acquired by either spouse during marriage. And unless a separation agreement or divorce action is executed or filed, property that is subject to a 50/50 distribution (regardless of how the property is titled). As long as two people are legally married, both parties have equal rights to the control and management of community property.

However, separate property state law in California excludes from community property, any property:

  • Owned before the marriage
  • Inherited by one spouse or received as a gift during the marriage
  • Earned or acquired while a couple is legally separated
  • Deemed separate property by written agreement of both spouses

How Does This Affect My Life Insurance Policy?

If the premiums on your life insurance policy are paid out of community funds, your spouse is entitled to a community share in the policy proceeds. It is only through your spouse’s written consent that you can make a change to the policy, designate another person as beneficiary or have their community interest in policy proceeds waived or released.

If you wish for someone other than your spouse to have legal claim to your life insurance policy proceeds upon your death, you have several options:

  • You may enter into a prenuptial agreement prior to marriage
  • If you're already married, you may enter into a a postnuptial (transmutation) agreement
  • You may set up a separate property account and use separate funds to finance your policy premiums for the entirety of your coverage

Note: every situation is unique. A lawyer can provide you with more detailed information based on your specific circumstances.

Learn More

To learn more about life insurance, read through some of our guides below. 



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