Sunday, May 07, 2006

Is Severance Pay Income for Purposes of Support?

On May 2, 2006, the Superior Court of Pennsylvania addressed an issue of first impression: Should severance pay be considered income for the purpose of support or should it be considered a marital asset, to be divided between the parties?

In Berry v. Berry, the appellate court looked to whether the severance pay was intended to replace anticipated income or reward the employee for efforts made during employment. Accordingly, the facts of each case must be examined, including the company's severance pay policies, to determine if the severance pay should be added to income and used to calculate support, or if the value of the severance should be added to the marital assets to be divided.

We have child support guidelines in Pennsylvania - which means we take Father's income and Mother's income and look to what the guidelines dictate as to the appropriate amount of support. However, demonstrated in Berry v. Berry, determining the number to use for the parent's income can be a complicated process. In this case, the severance pay amounted to $306,250. Assuming the parties divide the assets 50/50 (of course many cases result in other percentage divisions), Mother could stand to gain over $150,000 additional in assets. Adding that $306, 250 to income, which would mean spreading it out over a term of months, would mostlikely not result in an increase of over $150,000 in child support.

Accordingly, while we have child support guidelines, the analysis to determine support most often requires a much more complex equation than simply inputting child support numbers into a grid. For the best estimate of a potential support award, consult with an attorney who can analyze all of the facts and take the unique circumstances of your case into account.