Case Law Update: ED and Classification of Life Insurance Proceeds

By Rebecca K. Watts

Richter v. Richter, decided COA June 2, 2020 (equitable distribution, classification of life insurance proceeds)

During the time Husband and Wife were married to each other, Husband’s ex-wife died. Husband was beneficiary of a life insurance policy that ex-wife had maintained. During the marriage of Husband and Wife, some of the life insurance proceeds were used to make purchases. In the equitable distribution proceeding, Wife claimed the life insurance proceeds and the items purchased with it were marital property of Husband and Wife. Husband claimed it was all separate property. The trial court classified the proceeds and the items purchased with the proceeds as Husband’s separate property. Wife appealed.

The Court of Appeals affirmed the trial court’s classification. Husband did not own the life insurance policy on his ex-wife and did not pay any of the premiums on the policy—he was merely the beneficiary, so the proceeds were properly classified as a gift to Husband and so his separate property. The Court of Appeals distinguished this case from the recent Crago case (decided November 5, 2019) in which life insurance proceeds received as the result of the Wife’s ex-husband’s death were properly classified as marital property. In Crago, Wife had actually been the one to pay the premiums and made those premium payment during the marriage.