“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.
Divorces can sometimes be complex. The complexity of the divorce depends on a number of factors. The most important reason at the core of most Orange County divorces whether they are complex or simple is finances. The financial aspect of a divorce is most commonly at the fore of divorces with each spouse making finances their number one priority after the children in a case. The complexities of the divorce can sometimes make the use of forensic accountants almost inevitable in some situations. In this blog, we will look at the role of the forensic accountants in Orange County divorce cases.
Why Are They Called In A Divorce Case?
Orange County divorce attorneys use forensic accountants in situations where the financial matters become too technical for a lay person to be able to comprehend. This can be in situations related to valuation disagreements and tax issues.
· To Determine Child Support
In cases where the spouses are self employed and therefore have no set salaried or monthly income, an Orange County lawyer will need detailed analysis of their incomes to be able to take out the specific and equitable child support amount. A forensic accountant can be of use not only to the Orange County lawyers in determining the exact incomes of both.
Sometimes, forensic accountants are used to protect a spouse being over calculations of his or her income by the Orange County family courts. Forensic accountants are also beneficial in being able to identify concealment or underreporting of income to avoid the hefty child support payments.
· To Determine Spousal Support
The process of determining spousal support is similar to that of determining the child support. This means that most of the work that the forensic accountant is likely to do in child support cases is similar to his/her tasks for spousal support. A forensic accountant can be asked by the courts or the lawyers of either of the spouse to make a marital life style calculation which will help the courts get an exact bearing of the couples’ financial past.
· Valuation of the Business
Orange County divorces that have self-employed spouses tend to have more financial intricacies than the other ones. In such a moment of time, there are several issues that can come up, one of the most important one is the valuation of the business for its correct distribution among the parties. Forensic accountants use their financial knowledge to solve such complex valuation issues allowing for fairer decisions.
· Separate or Community Property
There are distinctions under California law between the two types of properties. One of them is the community while the other is separate property. At times, the intricacies of the financial matters can require use of forensic accountants are brought in to distinguish between the communal and separate property.
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.
Under California law, most property and debts of the marriage will generally be characterized as either community property or separate property.
“Community Property” is all real property (i.e. real estate) or personal property that you and your spouse acquired through labor or skill during the marriage (i.e. from date of marriage to date of separation). Community Property means that each spouse has a one-half interest in such property, regardless of whether property is in only one of the spouses’ names or whether only one of the parties worked during the marriage.
In addition, debts incurred during the marriage are generally considered community obligations, even if the debt is in only one of the spouse’s names. There are some exceptions to this rule, such as student loans, which are considered the separate property debt of the spouse who incurred such student loans because they also get the benefit of the education obtained as a result of such student loans.
Pursuant to California law, Community Property assets and debts are generally divided equally between the parties. However, the parties can agree to a division of property that favors one spouse over the other.
It is highly advised that any marital debts be paid off from the proceeds of the property division so that both parties can start over with a “clean slate” and also so that there is no risk that the other party may default in paying a debt that they agreed to do in the divorce. However, this is not always an option in situations where the parties have more marital debts and obligations than assets.
“Separate Property” is property and debt acquired prior to marriage, property acquired and income earned after date of separation, and any gifts or inheritances received before, during or after marriage. Such property is not divided in the divorce because separate property is not marital property.
In addition, Family Code Section 2640 entitles the reimbursement of a spouse’s separate property contribution of the down payment made on a community property home and any improvements made to such community property home, if you can prove such payments with sufficient documentation.
Unfortunately, property division can become complicated in situations where separate property has become commingled (i.e. mixed) with community property, such as bank accounts. Moreover, there can be situations where one spouse contends that an asset is their separate property asset while the other claims that there was a “transmutation” of the character of the property from separate into community property. Such determinations can be complicated and you are best advised to seek legal advice to deal with those issues.
Gerald A. Maggio is a trained Orange County divorce mediator who has amicably resolved cases many cases out of court, as well as an experienced divorce and family law attorney. Mr. Maggio founded California Divorce Mediators in 2012 with the belief that although “not every marriage can be saved, every family can” and a mission to save families from the financial and emotional distress associated with traditional divorce litigation. California Divorce Mediators is located in Irvine, California, and serves the Orange County area and other counties in California offering divorce mediation, child custody mediation and mediation of other family law matters.