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California Law - Disability Benefits Disability benefits are separate property if intended to replace the spouse's retirement income earned after the date of separation. If the benefits were purchased with community funds and intended at the time the premium was paid to provide retirement income for the community, then the payments are community income. And so, if, at retirement age, disability benefits convert to pension benefits, then at retirement they become marital property. In the case of term insurance, the court will look to the parties' intention at the date the most recent premium payment was made. Cases: Elfmont (1995) 39 Cal Rptr 2d 590, 9 Cal 4th 1026 (Where the renewal of term disability insurance was made post-separation with separate funds, then the payments will be separate property. This is so even where deterioration in the insured's physical condition is such that he could not have obtained the insurance but for the renewal clause on a policy that had been purchased during the marriage.) Saslow (1985) 221 Cal. Rptr 546, 40 Cal 3rd 848 (where disability insurance was purchased wholly out of community funds and payment of the benefits started during the marriage, the benefits received after the separation were community property, insofar as they were intended to provide retirement income, and separate property, insofar as they were intended to replace the disabled spouse's post-dissolution earnings). Samuels (1979) 158 Cal Rptr 38, 96 CA3d 122 (disability benefits are separate property until retirement age, at which point they become pension benefits and thus marital property).
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