Will a Personal Injury Settlement Be Considered a Marital Asset?

For most people, divorce is a difficult experience, emotionally and financially. In addition, dissolving a marriage can be more complicated when the couple has assets that are somewhat difficult to divide fairly. A personal injury settlement is a good example of this. Though personal injury settlements are not always considered marital property, there are some circumstances when they might be divided as a marital asset in a divorce.

The Argument Against Including Personal Injury Settlements as Marital Assets

There are several reasons why personal injury settlements are not generally considered marital assets. In most cases, they are awarded with a very specific purpose: to cover the expenses that come from an undeserved injury.
  • The person who receives the settlement often has expensive medical bills to pay, sometimes a lifetime of medical care and bills.
  • Some of the settlement money may be designated for the victim’s pain and suffering, which the victim’s spouse does not suffer.
However, not all of a typical personal injury settlement is for injuries or pain. There is often an amount included for lost wages and similar expenses. Because wages are considered marital assets, it stands to reason that reimbursement for lost wages also may be so.
Exceptions to the Rule

As with all legal principles, there are exceptions to the rule which may affect any one case. We can look at times when courts have included personal injury settlements as marital assets to see how they could apply to an individual’s situation. Courts have been known to give an estranged spouse part of a personal injury settlement in cases where:
  • Funds are placed in a joint account with the intent of using them to pay general household expenses.
  • The settlement primarily reimburses lost wages for a period during which the uninjured spouse supported the household.
  • The personal injury settlement is the primary source of income for the household.
  • The settlement is intended to cover damage to marital property, such as a car or house.
In these cases, the settlement funds are being used as marital assets so the courts sometimes decide to treat it as such in the case of a divorce. This is yet another reason that it is important to consult a personal injury attorney. A settlement should be protected so it can be used for the benefit of the victim of the injury.
Protecting a Settlement

Even in a happy marriage, it is important to take steps to protect a settlement in the case of eventual divorce. For instance, a family lawyer Arizona relies on may recommend that you keep the settlement in a separate account from the joint account so it does not become communal property. It is also important to keep records of how the settlement money is spent. A person who can show that the money is earmarked for, and currently used for, specific needs resulting from the personal injury will stand a better chance of keeping it in the case of a divorce. A personal injury lawyer can advise you on how to set up your settlement so it is protected throughout your lifetime.

Personal injury cases are complex in every way. The companies and entities responsible for such an injury often have a team of lawyers on their side. It is important that you as an injured party also have legal assistance to effectively make your case. If a personal injury settlement is part of your or your estranged spouse’s assets, it is also important to talk to a lawyer immediately. The laws regarding these cases are simply too complex to handle alone.

Thanks to our friends and contributors from Hildebrand Law for their insight into protecting a personal injury settlement during a divorce.
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