Under the community property system, a policy that started out as solely the separate property of one spouse may over time acquire the characteristics of community property.

• A. True.
• B. False.
• C. Only if both spouses agree in writing.
• D. Only after a divorce.

Answer: (A)

In community property systems, property acquired during marriage is treated as community property, and separate property can become community property if community funds are used to create or improve it. A life insurance policy that starts as the sole property of one spouse can accumulate payments or cash value with community funds over time. When that happens, the policy—at least to the extent funded by the community—takes on community property characteristics. No written agreement or divorce is required for this change; it can occur during the marriage as funds are commingled and used to pay premiums or grow the policy’s value. So the statement is true.