Property Division in a Divorce
Married couples usually share property and finances acquired during marriage. But even one spouse's separate property can become joint or marital, which a judge can divide between the couple in a divorce.
Generally, one spouse’s property or assets owned before marriage—and gifts or inheritances received during marriage— remain that spouse’s separate property when the couple divorces. Depending on where you live, you or your spouse’s personal injury award can also become marital property. If a court decides that the injury award is joint, a judge may divide it between the spouses.
Approaches to Dividing Personal Injury Awards
Where you live will affect how property is divided in your divorce. There are two types of property division methods—the community property or equitable division approach. Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In these states, a court will divide all marital property down the middle, meaning your personal injury award could be divided 50/50 between you and your spouse. The remaining states use an equitable division approach, which results in a fair, but not necessarily equal, division of property. But two states—California (a community property state) and New York (an equitable division state)—have their own rules regarding personal injury settlements.
Community Property Approach
Even if you live in a community property state, the nature of you or your spouse’s personal injury award will affect how it’s divided. For example, an award for lost wages will be treated as marital property and divided equally between the spouses in a community property state. By contrast, personal injury awards that compensate a spouse for a lost limb or pain and suffering are typically considered separate property, which belongs to the injured spouse. However, if settlement funds become commingled with marital assets, they can become marital property.
Notably, California has its own rules regarding personal injury settlements. Generally, if the accident happened during the marriage, California law treats the entire personal injury award as community property.
Equitable Division Approach
Although the majority of states follow an equitable division approach when dividing marital property, these states vary in how they treat personal injury awards. Some states will treat the entire award as marital property if the accident occurred during the marriage. This means payments for loss of an arm or leg, lost wages, or pain and suffering could be subject to division in your divorce. Other equitable division states may treat different portions of the award as separate or marital.
New York’s personal injury laws treat one spouse’s personal injury award as separate property. While there can be exceptions to this rule, under New York’s approach, an injury settlement isn’t subject to division in a divorce.
For example, if you or your spouse received a personal injury settlement that included $50,000 for medical bills, $25,000 for pain and suffering, and $25,000 for missed work, the court may deem payments for missed work as marital property and the remainder of the award as the injured spouse’s separate property. Certainly the unique circumstances of your case will factor into a court’s decision. Specifically, a spouse who took off significant time from work to care for an injured spouse may be entitled to portions of a personal injury award in an equitable division state. If you have specific questions regarding a personal injury award in your case, contact a local family law attorney for advice.
Questions for Your Attorney
- My spouse was injured while we were married, but he hasn’t received his personal injury settlement yet. What happens if I file for divorce before my spouse receives the award?
- I received a personal injury settlement and want to keep that money separate in my divorce. Is there anything I can do?
- My spouse’s personal injury award was a lump sum payment that didn’t distinguish between medical bills and pain and suffering. Does this mean the whole award is automatically treated as marital property?