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How can I protect my personal injury award or settlement during a divorce?
The short answer to this question is that you probably cannot protect a personal injury award from being part of a divorce settlement, depending on the state of residence when filing for the divorce. It is actually illegal to hide assets or attempt to lower the value of a particular item when your spouse has a legal claim to half of the asset. However, good planning before a divorce can help you reach an equitable settlement in some states when you make a good faith effort toward an amicable divorce.
The first step in protecting a personal injury settlement is reviewing the divorce laws in your state or consulting with a divorce attorney concerning any legal steps that can be taken to protect a personal injury settlement.
Community or Equitable Property
There are currently 10 community property states in the U.S. that consider all property owned by a couple to belong to both partners. Those states are Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. Puerto Rico also uses community property doctrine as well, but is considered a territory instead of a state. In community property states, the court will generally divide the marital property equally.
It is also important to keep in mind that debts get divided as well, and physical control of a particular piece of property may not be the final result. All states treat marriage dissolution in the same manner as company dissolution, which many times means that one spouse pays the other in money instead of property division. It is important to remember that money is property, and a personal injury settlement that is the result of an accident during the marriage can be considered marital property, with some potential exceptions based on how the settlement is structured.
Personal Property and Personal Injury Settlements
There is one basic exception to personal injury settlements being considered marital property in most states. That exception is the amount of a settlement that is damage recovery for non-economic pain and suffering. Lost wages would have been marital property had the injured party been able to work, so that portion of a settlement would be divided as property. Expense reimbursement to and from medical treatment is also divisible.
The exception is that damages resulting from endured non-economic pain and suffering, and ongoing medical coverage, are considered the personal property of the injured party by most state courts, even in community property states, and can be left out of the dissolution process if the court makes the final decisions.
In many cases, an injured party's spouse may also have a claim for loss of consortium, and that settlement will be issued in their name. The actual name on the settlement check can establish a claim to a settlement as personal property in many cases, and especially states like New York and Florida that implement pure equitable property doctrine. The court recognition of a date of separation for a divorcing couple can also matter in some dissolution of property decisions, especially if the injury occurred after the couple ceased cohabitation.
Protection through Divorce Mediation
It is important to remember that a court is generally an arbitrator, and the best way to protect a personal injury settlement is very often through the mediation process. In mediation proceedings, the attorneys for each spouse will address all fiduciary issues involving their client and may be able to negotiate a divorce settlement concerning the personal injury settlement in the mediation agreement. Once again, financial liabilities can matter and often the divorcing couple can reach an agreement before the court intercedes.
In some cases, marital agreements can also be finalized before the divorce even begins. Courts rarely alter divorce agreements in all states, with the possible exception of cases where alimony or child support are issues. Using mediation gives all parties a comprehensive look at what the consequences of a divorce may actually entail.
It is clear that personal injury settlements can complicate any divorce, regardless of how unique the divorce case may seem. Having an experienced and effective divorce attorney can make a major difference when trying to keep as much of a personal injury settlement as possible when divorcing. In addition, if a divorce appears imminent while your personal injury case is being negotiated, be sure to let your personal injury lawyer know the situation so they can structure your settlement in a manner that is advantageous to you.