An issue that arises in an Orange County or Los Angeles County divorce proceeding concerns the disposition of disability payments. Generally, if disability payments are received and not deferred compensation after the date of separation, they are the separate property of the disabled spouse. Marriage of Flockhart (1981) 119 CA3d 240.
However, many times disability payments are elected in lieu of retirement benefits. In that case, to the extent the payments are earned by virtue of employment during marriage and before separation, the payments are community property. In this situation, payments that are compensation for disability are the disabled spouse’s separate property to the extent that they exceed what would have been received as retirement benefits. The remainder would be characterized as community property to the extent it would have been community property if received as retirement benefits. Marriage of Stenquist (1978) 21 C3d 779.
Obviously, the parties will each need to analyze the disposition of the disability payments before any final characterization is made. For more information on filing an Orange County divorce or if you have questions on how your disability payments should be allocated, contact and Orange County divorce attorney for more information.