“Is severance pay separate or community property” is a common question that is asked by spouses going through a California divorce. Severance pay or termination pay can come in many different forms.
This can be a sizeable asset to consider in your property and asset division cases. Whether it is a community property or separate property has always been unclear with most lawyers developing answers to this question using their wealth of experience.
When courts are considering a severance pay or any sort of lump sum benefits that one of the spouses may receive because of their employment, the courts usually see if the benefits received were vested during the marriage. This vesting can be partial or whole and needs to be determined by the judge.
Another slightly easier way of looking at the situation is considering whether the job that resulted in the severance pay was ongoing during the marriage and before the spouses decided to part or was it something unrelated to the marital employment.
The Question Stems from the Lehman Case
The case of Marriage of Lehman dealt not with severance pay but another benefit deriving from employment, i.e. an early retirement benefit. This case involved a retirement benefit given to an employee by an employer not accrued during the marriage. This case highlighted how it is best to look at these kinds of cases. It showed that the Orange County divorce attorney and their need to not only see the nature of the pay, but they also need to check when it was accrued and the benefit that it provides.
There have been some examples in the past when the family law courts have held severance pay to be separate property of the employed spouse instead of a community property belonging to both. The three instances are when:
- Payments were made because there was a threat of future loss of earnings
- Payments were meant to make the employee forgo future elements
- Benefits given as a result of layoff which has happened because the overall revenue of the industry is going in a decline.
Gerald A. Maggio is an experienced Orange County divorce and family law lawyer and family law attorney located in Irvine, California, serving the Orange County and Riverside areas. Mr. Maggio assists clients with legal issues including divorce, legal separation, divorce mediation, child custody, prenuptial agreements, stepparent adoptions, and other family law issues. Mr. Maggio has practiced law in California since 1999, and founded The Maggio Law Firm in 2005, focusing exclusively on divorce and family law matters.