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To all my married friends in Texas,

According to David P. Stanush, generally---life insurance policies acquired during the marriage are the community property of the couple. As a result, upon the death of the insured spouse, the proceeds being paid out are treated as being the one-half community property of the insured spouse and one-half community property of the non-insured spouse. However, there is a strange rule that applies when the life insurance policy proceeds are made payable to the surviving spouse. Instead of being treated as community property, the entire proceeds are treated as the separate property of the spouse receiving the proceeds. The rationale is that the life insurance proceeds are a gift from the insured spouse to the non-insured spouse and since gifts received by a person are that person’s separate property, then the proceeds are separate property. However, under this rationale all property passing at death to the surviving spouse would be that spouse’s separate property (a contention that has been rejected in all areas except the life insurance arena). The problems in interpretation have arisen because courts apply different legal principles to cases that have bad facts. For example, under current Texas law all insurance proceeds are exempt from the insured creditor’s claims unless the policy proceeds are paid to the insured’s estate. Tex. Ins. Code § 21.22. It used to be that only insurance policy proceed payments that were paid out in installments were exempt from such claims (i.e., lump sum payments were subject to creditors claims of the deceased). To protect the surviving spouse from the creditors of the deceased spouse the courts created a legal fiction that the proceeds were separate because it has always been the law that one spouse’s separate property is not liable for the debts of the other spouse.

Humberto
www.pfatx.net


References
TEXAS COMMUNITY PROPERTY – WHEN IS WHAT IS MINE OURS? ().David P. S...

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Hello Humberto, Enjoyed the article, thank you. Sonia Granoff
You're welcome Sonia. How funny, I saw your office today this morning. I went to pick up a client at love field.

Humberto
Wish you would have stopped by! I would like to network with you.

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