If you or a spouse has received a settlement from a personal injury lawsuit, it is natural to wonder whether such an award qualifies as marital property in a divorce. Depending on the laws of the state where you live, marital property will be divided under either an equitable distribution model or a community property model. Equitable distribution states attempt to divide property fairly and equitably, which does not necessarily mean equally. Community property states, on the other hand, usually divide marital property equally between the parties.
Property that is not considered marital property from a legal perspective is not subjected to either of these distribution methods. For this reason, it is in a spouse’s best interests to determine precisely what is and is not marital property. Personal injury awards and settlements are an excellent example of just that.
Are Personal Injury Awards Marital Property?
As a general rule across the majority of states, whether personal injury awards are considered marital property will depend on that state’s specific laws and marital distribution standard. If a state’s family law court ultimately decides a personal injury award is joint in nature, then a judge may choose to divide it between the spouses in some form.
Determining whether a personal injury award could be marital property in your divorce depends on what state law says broadly, and specifically, whether the facts of your divorce case are similar to other legal cases involving personal injury awards in divorce.
For example, in a community property state, the nature of a spouse’s personal injury settlement/award itself can play a role in whether the award can and should be divided. An award based on pain and suffering, for example, will be based on the spouse’s pain and suffering, so treating the suffering as marital property would not make sense.
Alternatively, it would make sense to treat an award based on lost wages as marital property. Further, when settlement awards become commingled with marital assets — say, using the award to buy a family home — then the personal injury settlement could be construed as marital property.
This delineation is seen most clearly in Louisiana (a community property state), thanks to the 1996 case of Ramsey v. Ramsey. In the case, the court held that it was equitable to treat the lost earnings portion of a personal injury award as marital property, whereas the pain and suffering portion of the damages was not viewed as marital property.
The majority of states are equitable distribution states, however. As a broad principle, personal injury awards are not treated as marital property unless the award or settlement is specific regarding what the damages are meant to cover. Again, lost earnings, medical bills or the loss of companionship may be used as evidence that the award should be viewed as marital property.
Additionally, even if a court does not treat an injury settlement as marital property to be divided, this does not mean the settlement is exempt from all divorce considerations. For example, a Florida court held in the 2002 case of White v. White that, even if a workers’ compensation settlement is not considered a marital asset, it can be used as a source to determine whether alimony payments are permitted.
For more information whether your personal injury award will be treated as marital property, talk to a family lawyer Tampa FL trusts who will help you navigate the nuances of your state’s statutes and relevant case law.
Thanks to our friends and contributors from The McKinney Law Group for their insight into divorce practice.