Are Personal Injury Settlements Considered Marital Property in a Divorce?
While family law and personal injury are distinct areas of the law, there are certain circumstances in which they overlap. An example of a situation in this category is when a divorcing spouse collects a personal injury settlement award or expects to receive one soon. This lump sum amount could represent one of the couple’s most substantial assets. Therefore, both parties will want to know whether this amount will be included in the marital estate.
What Assets Typically Comprise the Marital Estate?
In general, any assets accumulated or acquired during the couple’s marriage are distributed equitably during a divorce. Any assets that one of the spouses owned before the marriage are typically considered non-marital. With that said, these types of assets are not included in the marital estate. Similar to most other legal matters, there exist exceptions to these rules. There are various nuances involved in answering whether a personal injury award could be a part of the marital estate.
When are Personal Injury Settlement Awards Considered to be Marital Assets?
In general, a personal injury settlement award will not be included in the marital estate during a divorce in Alabama. If the injured spouse already received the award before the couple was married and the asset remains separate during the marriage, it will be considered separate property. However, as mentioned earlier, exceptions do exist, and this issue is not always straightforward.
Below are certain instances in which a personal injury settlement, or at least a portion of one, might be included in marital assets:
Itemized Personal Injury Settlement Award
Upon being injured because of someone else’s negligence, the victim is entitled to various types of compensation intended to make them “whole.” This may include compensation for direct financial losses, such as medical bills, lost income, and the loss of future earning capacity. The damages may also include non-monetary losses such as emotional turmoil, pain and suffering, permanent injury, reduced quality of life, and loss of companionship (loss of consortium).
The non-injured spouse may be able to claim a part of the settlement award if the award contains an itemized description of what amount is attributed to each expense or loss. They would specifically be entitled to the amount awarded for loss of companionship and to a share of lost income.
The injured spouse’s earnings are considered marital property. Therefore, both partners have a claim to these earnings. However, pain and suffering and other intangible losses that the injured party sustained should belong exclusively to that spouse during a divorce.
Notably, many personal injury settlements are not itemized. If a court cannot establish which specific losses were supposed to be covered by the award, then there is a strong possibility that the entire asset will be given exclusively to the injured spouse. But it may be possible to track down an itemized list if one was used during settlement discussions.
Co-Mingling of Settlement Funds
The settlement proceeds will be included in the marital estate if the settlement award has been co-mingled with marital funds to such a degree that the court is unable to establish what amount is marital and what amount is a part of the settlement. For instance, you deposit the personal injury settlement award into your joint checking account, which is the same account where paychecks and other forms of income are deposited.
Subsequently, this money is used month after month to pay your credit card bills, mortgages, vehicle payments, and other household expenses. At a certain point, it will not be possible to segregate the funds which are a part of the award from the monthly household income.
Injury Related Expenses were Covered with Marital Funds
Medical expenses start piling up as soon as someone is seriously injured. However, it could take several months to collect the settlement award. In the interim, if the spouses use marital funds to cover the medical bills, then the same amount could be taken from the settlement award and included in the marital assets.
When it comes to the division of personal injury settlement awards in a divorce, Alabama law is not straightforward. Due to this, you require a skilled divorce lawyer who can fight hard to protect what is rightfully yours. If not, you could lose much of what is legally yours merely because your ex-spouse hired a more competent lawyer than you.
Emotions can run high during a divorce, and you could find yourself going against a spouse who is determined to extract as much as they can from you.
Consult an Experienced Alabama Divorce Attorney
It can be a complicated process to divide marital assets during a divorce, particularly when there is a personal injury settlement award involved. If you are going through a divorce in Alabama, your need family law attorneys who have a deep understanding of the various areas of law, how they might intersect in such cases, and a commitment to fight aggressively for your rights. Speak to our attorneys at Smith Law Firm for the right legal counsel. Call us today at (334) 702-1744 for a consultation with a skilled attorney.
