San Diego Divorce Attorneys Blog

Many San Diego clients come from marriages where one spouse was the primary wage earner, while the other stayed home to raise the children. The stay-at-home spouse now worries that the divorce will leave him or her without long-term security. Even though in California, spousal income is community property and distributed equally, there is still a question of whether the division of property entitles the stay-at-home spouse to a share of the other spouse’s pension benefits or stock options. Below are some questions that clients often ask a San Diego divorce attorney.

Am I entitled to a share of my spouse’s pension benefits if he joined the pension plan before our marriage?

Generally, yes, per California Family Code section 2610. What matters is whether your spouse’s retirement benefits continued to accrue during the years you were married. If at the time of divorce, your spouse was eligible to retire, the court would use proration formula to determine your share of the benefits. The proration formula divides the years you were married and your spouse’s benefits accrued by the total number of years your spouse was part of the pension program. The result is a percentage that represents the community’s share of that pension.

Thus, if you were married to your spouse for 15 years and during thos 15 years your spous’s benefits were accruing, and if your spouse was employed and also accrued benefits from that same employer for a total of 30 years, the community’s share would be 15/30, or one half of the pension benefits, and you would be entitled to half of that, or one fourth.

What if my spouse is eligible to retire, but chooses not to? Does that affect how much I receive?

No, because your spouse’s pension benefits mature at the time he is eligible to retire, not when he actually retires.

What if my spouse is not eligible to retire at the time of our divorce?

You would still be entitled to receive half of the community’s share of your spouse’s pension benefits. Tthe court could issue an order for you to receive your share when your spouse is eligible to retire. Some divorcing parties may agree that the spouse with the pension may “cash out” the other spouse, but a court could not make this type of an order.

Do stock options work the same way as pension benefits?

Yes, in the sense that you receive a share of your spouse’s stock at the time it matures, or “vests,” based on the number of years you were married. The difference is in the way your share is calculated. The portion of community property is based on the intent of the employer who granted the option. If the court finds that the employer awarded the stock option to reward your spouse for past services, then it uses the Marriage of Hug formula, which calculates community property based on the date your spouse started working. If the court finds that the employer awarded the stock option to encourage your spouse to stay with the company, it uses the Marriage of Nelson formula. Marriage of Nelson calculates community property based on the date the options were first granted. While both formulas can be a little confusing, what matters is that the stay-at-home spouse is entitled to a portion of the stock option.

If my spouse receives severance pay, would I be entitled to a share?

There is no clear-cut rule for severance pay. Some have argued successfully that it is not community property because it replaces lost income the spouse would have earned after the divorce. Others have argued successfully that it is community property because it was paid for by employment during the marriage.

If you are in the middle of a divorce and have questions about pension benefits, stock options, and other retirement issues, find a knowledgeable San Diego divorce attorney who can prepare you for what to expect.
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Many San Diego clients make the decision to divorce after decades of marriage. This means not only a painful separation after years of their lives being intertwined, but also facing a thicket of different property laws. First and foremost are California’s current community property laws, which get more complicated if the couple once lived out of state. Then there could be property laws from other eras that determine the division of property for each spouse.

If the couple lived in California throughout the marriage, their home, employment income, and any purchases made with the employment income would belong to each spouse equally. Only a gift, inheritance, or property owned before the marriage would be considered separate property. By contrast, in separate property states, the person whose name is on the title owns the property. If the couple were to divorce in one of the 40 separate property states, the result would be known as “equitable distribution”: a property distribution that is not equal, but based upon what each spouse contributed to the marriage. Yet if the couple moved to California and later divorced, our state treats much of the separate property as quasi-community property. Quasi-community property is simply property that would have been community property if the couple had lived in California. During the marriage, it is treated as separate property; but once the couple divorces, it is divided equally between the spouses, like community property.

This is the basic concept behind quasi-community property, but in reality, it is not so clear-cut. Couples who accumulated property over several years in another state may have lost or misplaced documents establishing the nature of the property — whether it was kept entirely separate, or was used for the family. Separate property used for family purposes has often been ruled to be community property in California. If it cannot be properly identified, one spouse risks losing significant assets that he or she would otherwise be entitled to. Without proper documentation, the only evidence of the couple’s history in their previous state comes from their own statements and those of family and friends. These statements may be based on faulty memory, or be otherwise biased and unreliable. In these situations, couples need an experienced San Diego divorce attorney to piece together as many records as possible until the most accurate situation emerges.

Couples divorcing after a long marriage may also be affected by laws that no longer exist today, but were relevant during the marriage. One such law involves transmutation of property. Transmutation is an agreement between spouses that community property will become one spouse’s separate property, or that separate property will become community property. Today, sections 850 through 853 of the California Family Code require that all transmutations must be expressly stated in writing by the spouse whose interest is adversely affected. However, until 1985, transmutations could be oral. That means that community property could have become separate property without any evidence other than one spouse’s declaration. Confusion over the true nature of the property could lead to battles between spouses over what was separate and shared, based on inaccurate memories. Some marriages may also be affected by the Married Women’s Special Presumption, which has not been valid since 1975. Property purchased in the woman’s name before 1975, without any indication of her marital status, was presumed to be her separate property.
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