Advanced Underwriting Consultants

Question of the Day – January 4

Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: My client is getting divorced.  During the marriage, she was beneficiary of a life policy on her mother’s life.  My client left the death proceeds on deposit with the life insurance company.  Is the insurance money property that will be divided up during the divorce?

Answer: In general, inherited property, including the death benefit of life insurance policy received by one of the spouses during the marriage, stays the separate property of the spouse who received it.  In the event of a divorce, separate property is not usually subject to being claimed by the other spouse.

There are circumstances where the general rule would not apply.  For example, the inheriting spouse may have made a gift of some or all of the separate property to the other spouse during the marriage.  Under those circumstances, the inheriting spouse could have transformed separate property into marital or community property.  Marital or community property is subject to being divided between the spouses in the event of a divorce.

Questions related to dividing up property related to a divorce always should be answered by the client’s own divorce attorney.  To give a reliable answer requires specific and detailed knowledge of the facts.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.