MBE Rules · Community Property
Severance Pay
Severance pay (Cal.)
The rule
Severance replacing post-separation earnings is separate property; severance earned by length of marital service is community — classification follows the substance of the benefit.
In plain English
Severance pay is classified based on how it was earned. If the severance is compensation for work done during the marriage, it is considered community property, but if it replaces earnings after separation, it is treated as separate property.
Worked example
John and Mary were married for ten years before John was laid off. He received a severance package that was calculated based on his years of service during their marriage. Since the severance pay is tied to his employment during the marriage, it is classified as community property.
Memory hook
Severance pay: earned during marriage, belongs to both; earned after separation, belongs to one.
The trap
Exams may present scenarios where the timing of severance pay is ambiguous, leading students to misclassify it. Look closely at when the severance was earned to avoid confusion.
How examiners test it
Questions often involve fact patterns where severance pay is awarded after separation, testing the candidate's ability to distinguish between community and separate property classifications.
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More Community Property rules
- Interspousal Fiduciary Duty · Cal. Fam. Code § 721; § 1100(e)
- Management and Control of CP · Cal. Fam. Code § 1100(a)-(d)
- Equal Division at Dissolution · Cal. Fam. Code § 2550
- Putative Spouse Doctrine · Cal. Fam. Code § 2251
- Business Goodwill · Marriage of Foster (goodwill)
- Credit Acquisitions · Marriage of Grinius (lender intent)