There's rarely a divorce that is considered pleasant and enjoyable. In addition to the emotional toll that a divorce takes on both parties, there are often financial challenges as well.
When one spouse is compensated for a personal injury settlement, is the other entitled to part of the settlement?
When going through a divorce, assets and debts are considered to be either marital property or separate property. In this article, we'll discuss what those two terms mean and how both are divided during a divorce.
Many states are marital property states (not community property) which means all debts and assets acquired during the marriage will be divided equally. All property, regardless of how it is titled, is divided between the two parties. This also includes portions of a personal injury settlement.
In addition to assets acquired during marriage, other property included in marital property includes income, retirement, and pensions. Separate property (community property) includes gifts, inheritances, and assets and debts acquired prior to marriage.
Many states are considered equitable distribution states, which means dividing assets during a divorce. To do this, the process starts with a thorough inventory of all assets, property, and debts acquired by either spouse. These items are then categorized in the eye of the law as separate property of marital property.
Separate property is considered assets or property owned independently prior to marriage. Under different circumstances, other assets and property can be considered separate property—even if obtained during marriage. This would include things like inherited property even if it was received while the couple was married.
Other separate property includes non-economic damages like pain and suffering, reduced income or earning ability, emotional distress, and loss on consortium. These are mental or physical damages that the victim experiences.
As previously mentioned, marital property is the assets, property, and debts acquired during marriage. Marital property is often considered the income, and everything purchased through that income while married.
Since a personal injury settlement is a mixture of both marital and separate property, the court will resort to equitable division. This means the judge divides the settlement fairly – although there are laws and regulations to follow.
Generally, compensation from lost wages and medical expenses during the marriage are treated as marital property because lost wages result in lost property. Especially if the victim uses marital assets and property to pay for expenses, such as medical, that are incurred while married. In terms such as these, sharing the compensation with the spouse is the fair thing to do.
However, many states consider payment for future lost wages, medical expenses, and pain and suffering to be separate property. A spouse is not entitled to claim any of this compensation because the couple will be divorced when the compensation is given.
Determining whether your spouse gets half (or some) of your personal injury settlement depends on a few factors. If the divorce is already in session, the personal injury settlement is separate from marital property.
There are two main types of damages given through a personal injury award. These damages are known as economic and non-economic damages. There are certain damages like pain and suffering and disfigurement that will likely be considered separate property.
Damages that are often considered marital, or community property, are loss of earning capacity during the marriage and damages that will help compensate the spouse for damages to marital property. Workers' compensation and disability payments are also often considered as marital property.
There are situations where settlements will play a role during divorce and may be required to split between spouses. Regardless of if spouses are together or separated prior to the personal injury settlement, a jury will determine if the award is split based on the unique situation.
How a personal injury settlement will be divided in a divorce depends on several details about the settlement itself. Three main factors are:
When the injury happened or when you were compensated
What you were compensated for
Where you put the money or what you did with it
If the injury occurred while married and the injury and its expenses affected the spouse's life, then they may be entitled to part of the compensation. This includes things like lost wages, medical bills, out-of-pocket expenses for the home, and property damage. The amount that the spouse will receive is determined by the factors above, plus your unique situation.
Note that a spouse will often not be able to get any of your compensation for non-economic damages like physical pain and suffering and emotional distress.
After reading the information above about marital property and separate property, and understanding the differentiating factors, it's vital to ensure the divorce settlement states the settlement compensation, the types of damages occurred, and when they occurred.
Oftentimes, the language used in a divorce settlement is a big determining factor on whether personal injury settlements are up for grabs.
To help protect your personal injury settlement from your divorce, be sure to divide marital and separate property. For example, if you were given the gift of money and added it to a joint banking account, or made a large purchase, then that money or property could now be considered marital property.
Find an experienced attorney who is willing to deep-dive into your specific case and provide tips on how to ensure you get the most out of your personal injury settlement. The right attorney will help you from the beginning to divide separate property from marital property.
Your attorney can also help write the specific language in a divorce settlement that will help you retain your personal injury settlement. Most often, anything acquired during marriage is considered marital property. However, your attorney can help overcome that presumption by writing a divorce settlement in your favor.
If you want to ensure a fair distribution of your personal injury settlement, it's vital to properly divide marital and separate property. A knowledgeable lawyer will help you categorize damages and protect your personal injury settlement.
A lawyer will also help you understand your legal rights to a personal injury settlement, especially if you suffer that injury during a divorce.
Each divorce and personal injury settlement case is different and there are several factors that can determine whether your spouse is entitled to your compensation. Consult with an experienced lawyer to understand your state specific laws and regulations.
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