Is Long Term Care Insurance Considered Marital Property ?
Husband alleges that Wife's long-term care insurance proceeds should have been treated as marital property.
In his single proposition, Husband claims the trial court erred by determining that Wife's disability income, which she received as a benefit under insurance policies purchased with marital funds, is her separate property.
The trial court did so based upon "the circumstances surrounding the purchase, specifically when the parties purchased the policies" and concluded "that the nature of the policy at the time of the purchase was income replacement and not for retirement."
Husband argues the proceeds from Wife's disability policy, payment of which commenced after the parties separated due to a medical condition requiring Wife to reside in an assisted living facility for the remainder of her life, should be included in the marital estate because the policy was purchased and premiums were paid during the marriage with joint funds. Relying on Christmas v. Christmas, 1990 OK 16, 787 P.2d 1267, Husband claims he and Wife purchased their disability policies in order to avoid using their retirement savings to pay for long term health care.
At the time of trial, the policy was paying $ 1675 per month for Wife's living expenses and care at the facility. Based thereon, Husband submitted a trial exhibit calculating the actuarial value of Wife's policy to be $ 192,625 ($ 1675 x 115 months [Wife's life expectancy based on I.R.C. 72]).
Christmas involved a disability policy that was part of the husband's compensation as a municipal firefighter. Under its facts, the husband and wife separated, the husband was hospitalized for three months and after filing for disability benefits claiming job stress, the husband was awarded "disability in the line of duty" benefits.
To resolve the issue of first impression, "whether disability benefits received after divorce are joint property subject to equitable division in a divorce action," the Christmas Court followed what it termed "replacement analysis," to explain the difference between disability benefits and retirement pensions:
All wage continuation plans are deferred compensation and function as insurance. Retirement pensions insure against superannuation, survival beyond retirement age. They function as a substitute for life savings. If a worker was not provided retirement coverage, the additional wages received would presumably be saved for superannuation. These savings, earned during the marriage, would unquestionably constitute joint property.Disability benefits, on the other hand, do not substitute for savings. Rather, they insure against loss of wages from disability before superannuation. Disability benefits received after divorce replace post-coverture wages that would be the earner's separate property. Thus, while retirement pensions replace joint property, disability benefits replace separate property. This difference in the replacement nature of the benefits requires that disability benefits be classified as the disabled worker's separate property. (Emphasis added). 1990 OK 16, P7-8, 787 P.2d at 1268.
After noting the wife's reliance on case law holding that, absent a specific statutory exemption, retirement pensions are jointly acquired, the Christmas Court explained:
Applying replacement analysis to the facts of this case, the nature of husband's benefits determines the classification, not the fact the benefits are termed a 'disability pension' in title 11 . . . the benefits awarded to husband replace the wages he would receive but for his disability. Therefore, these earnings received after divorce are his separate property. 1990 OK 16, P10, 787 P.2d at 1268.
Unlike Christmas, there is no dispute in this case that the proceeds Husband seeks to include in the marital estate are not "pension benefits," but instead "disability benefits" received after separation, the nature of which determines the classification as joint or separate property.
The record reveals that the disability policies were purchased at least 10 years before retirement and that the benefits, such as Wife receives, are triggered only if the insured is diagnosed with a permanent medical condition requiring long term care of that person.
Other evidence regarding the nature of the parties' disability policies may be gleaned from Husband's admission in his appellate brief that he must continue to pay premiums for his disability policy to have benefits and that he had the policy "in the event he should need it at some time in the future."
He also testified during his deposition that there are no death/survivor benefits or cash surrender values which might make these policies similar to life insurance policies having a present value.
As the evidence demonstrates, Husband's argument that they purchased their disability policies to avoid spending their retirement savings fails to consider that if Wife had become disabled prior to retirement age, as occurred in Christmas, the disability benefits she would have received under the same policy would have replaced any wages she would have received but for her disability.
We find no language in Christmas that would indicate that the nature of disability benefits changes depending on the timing of one's disability.
On this record, we must conclude the trial court's treatment of these benefits as Wife's separate property was neither clearly against the weight of the evidence nor an abuse of discretion.