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Community Property • Severance Pay
CPROP#021
Legal Definition
There is a split in authority regarding post-separation severance pay. (1) Under one approach, the severance pay replaces lost earnings and is thus separate property, but (2) other courts have held it is community property because, for example, it arose from a collective bargaining agreement and was thus earned by employment during marriage.
Plain English Explanation
Think of severance pay like a parachute. It's there to help you land safely when you lose your job. Now, if you're married and you get this parachute while still in the plane together, it's like a shared safety net. You were both in that plane, right? So, the law sometimes sees this parachute as something for both of you - community property. But here's where it gets more interesting. Let's say you've already jumped out of the plane – meaning, you're separated. Now, you get this parachute. Some courts argue, "Hey, I'm solo in the sky now. This parachute is mine alone!" In other words, they see the severance pay as separate property since it's like compensation for the solo flight after the separation.
On the other side, others argue it's shared property between a married couple, especially if it comes from agreements made during the marriage, like from a union deal.
On the other side, others argue it's shared property between a married couple, especially if it comes from agreements made during the marriage, like from a union deal.
Hypothetical
Hypo 1: Bob, who's married to Amy, is laid off from his job and receives severance pay. They're still living together and haven't started any legal separation. Result: In this case, the severance pay is likely considered community property because Bob received it while still 'in the plane' with Amy, meaning they were still together during his employment and at the time of receiving the severance.
Hypo 2: After separating from Amy, Bob gets laid off and receives severance pay. Result: Here, the severance pay might be seen as Bob's separate property since he's already 'jumped out of the plane' and is no longer in the shared marriage situation when he receives the severance.
Hypo 3: Bob is part of a union at work. During his marriage to Amy, he negotiates a severance package through the union. After they separate, Bob gets laid off and receives this severance pay. Result: In this scenario, the severance pay could be considered community property because it's tied to a deal made while Bob and Amy were still 'flying together' in marriage, showing how the context of earning the severance matters.
Hypo 2: After separating from Amy, Bob gets laid off and receives severance pay. Result: Here, the severance pay might be seen as Bob's separate property since he's already 'jumped out of the plane' and is no longer in the shared marriage situation when he receives the severance.
Hypo 3: Bob is part of a union at work. During his marriage to Amy, he negotiates a severance package through the union. After they separate, Bob gets laid off and receives this severance pay. Result: In this scenario, the severance pay could be considered community property because it's tied to a deal made while Bob and Amy were still 'flying together' in marriage, showing how the context of earning the severance matters.