## Facts

- The spouses married in 1988 and separated in 1997; they had one minor child.
- The wife was an executive at Compuware and participated in an executive bonus program involving cash bonuses tied to past performance and stock options she understood to be tied to future performance.
- Near the end of her employment, the wife negotiated a severance agreement connected to termination, providing severance pay and stock options.
- During marriage, the couple purchased a loose diamond with community funds; the husband set it into a ring and gave it to the wife with a card referencing her promotion and their anniversary.
- In the dissolution judgment, the trial court characterized the severance pay and stock options as the wife’s separate property and treated the ring as a gift to the wife and thus her separate property.
- The husband appealed, challenging the characterization of all three items.

## Issues

1. Whether the wife’s severance pay was community property because it was allegedly earned during marriage, or separate property because the right arose from a post-termination severance agreement.
2. Whether the wife’s Compuware stock options were improperly characterized as her separate property, including whether the trial court properly applied a time-rule allocation.
3. Whether a diamond ring bought with community funds could be awarded to the wife as separate property based on donative intent without a written transmutation satisfying Family Code § 852.

## Decision

- Affirmed the characterization of the severance pay as the wife’s separate property because substantial evidence supported that the right to severance arose from a new, negotiated agreement at termination, not from a preexisting marital entitlement.
- Affirmed the characterization of the stock options as the wife’s separate property; the options were part of the severance agreement and supported a finding they compensated future performance or post-separation events, and the time-rule application was not an abuse of discretion.
- Reversed the characterization of the ring as the wife’s separate property because it was acquired with community funds and no writing contained an express declaration transmuting it to separate property as required by Family Code § 852.
- Remanded for further proceedings regarding the ring consistent with the opinion.

## Legal Principles

- Severance benefits are characterized by what they compensate: if the right is created by a new, post-termination agreement rather than earned through marital labor or a preexisting employment contract, the severance may be separate property.
- Stock options are characterized by the purpose of the grant; courts may apply a time-rule allocation based on grant, vesting, and separation dates to distinguish compensation for past marital services from incentives for future services.
- Property acquired with community funds is presumptively community property.
- Under Family Code § 852, an interspousal transmutation requires a writing containing an “express declaration” of the change in property character.
- For a substantial item purchased with community funds, donative intent and noncompliant writings (such as a greeting card without an express declaration of changed ownership) do not effect a transmutation; absent a valid writing, the property remains community.

## Conclusion

The court upheld the trial court’s allocation of severance pay and stock options to the employee-spouse as separate property based on evidence they arose from a negotiated termination agreement and compensated post-marital factors, but it reversed the award of a high-value ring as separate property because community property cannot be transmuted without a written express declaration under Family Code § 852.


In re Marriage of Steinberger, 91 Cal. App. 4th 1449, 111 Cal. Rptr. 2d 521 (Cal. Ct. App. 2001)