After a grueling year battling it out in court over a distracted driving accident that wasn’t your fault, you finally receive a much-needed personal injury award. You breathe a sigh of relief. But just as your life begins to get back on track, there’s another surprise in store: divorce.
How do you keep your hard-earned award from being gobbled up in a divorce settlement?
Understanding “property” in a divorce
Before we discuss the specifics of protecting your personal injury award, it’s essential to understand how property is classified in a divorce:
- Separate property: Generally speaking, separate property refers to assets or debts a spouse acquired before marriage, after separation, or during the marriage but by gift or inheritance. Separate property is typically NOT divided during divorce.
- Community property: Most assets or debts accrued during marriage fall under this category. In community property states, community property is divided equitably among both spouses during a divorce.
Now, the crux of the issue: How is a personal injury award classified?
The answer depends on what the award was meant to compensate for. If the award was for pain and suffering, loss of a limb, or disfigurement, it’s often considered separate property. On the other hand, if the award is for lost wages or medical expenses incurred during the marriage, it may be deemed community property.
| Typically separate property | Typically community property |
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How to keep the award separate
Settlement awards often become community property, but there are steps you can take to ensure your personal injury award is protected:
- Prenuptial agreement: Executed before marriage, these contracts define how assets will be divided in case of a divorce. Clearly delineating that any future personal injury awards are to be considered separate property can protect you from losing your award in a divorce proceeding.
- Postnuptial agreement: Postnuptial agreements are similar to prenuptials but executed after marriage. It’s never too late to clarify the nature of your assets.
- Trusts: Placing the funds in a trust makes them less susceptible to division in a divorce proceeding. The type of trust and the precise manner in which it must be established varies depending on the jurisdiction and specific nature of the award. Consultation with an attorney who specializes in estates and trusts is strongly recommended.
Additional tips for protecting your award
It’s a good idea to keep thorough records of all court proceedings, medical bills, and any correspondence related to your personal injury case. This can help clearly establish the following:
- When your injury occurred,
- When your award was granted, and
- What the award was intended to compensate for.
Being able to establish these three things makes it easier for a judge to distinguish between separate and community property.
Additionally, it’s important to avoid using any portion of your award for joint marital expenses or to benefit both parties, as it might make it more difficult to claim that the award is separate property.
Emotional and psychological implications of personal injury awards in divorce proceedings
Divorce proceedings are psychologically challenging. These challenges can be even greater when a personal injury award is involved.
Even if a personal injury award is viewed as separate property, the events leading to it might have deeply affected both spouses. A traumatic event doesn’t just impact the injured individual; the spouse often undergoes vicarious trauma, watching their loved one suffer and having their shared life unexpectedly altered.
Divorcing spouses should recognize the emotional weight of a personal injury award when discussing the division of assets.
Couples undergoing divorce where a personal injury award is involved might benefit from therapeutic intervention. A counselor or therapist specializing in trauma can assist in navigating the complex emotions intertwined with the legalities of divorce and injury settlements. A good place to find a qualified therapist is the Psychology Today directory.
While it's a complex intersection of two distinct areas of law, it's crucial for anyone receiving a personal injury award and contemplating or going through a divorce to know their rights. The landscape is intricate, and each case brings its own unique circumstances.
The overarching recommendation? Engage with a qualified attorney who understands the subtleties of personal injury awards and divorce proceedings. With the right legal guidance, you can ensure you’ve done everything possible to protect your personal injury award.