Are Personal Injury Settlements Considered Marital Property in a Divorce?

Couples going through a divorce can sometimes be involved in accidents or other events that cause injury. What happens when a spouse sustains injuries due to a third-party’s negligence, files a personal injury claim, and collects a substantial settlement? Will the other spouse be entitled to at least a part of the settlement amount if they are getting divorced?

Consider a scenario where you have collected or expect to collect a settlement for your personal injuries. In that case, you may want to understand whether these proceeds are considered marital property (which will be divided equitably between the spouses during a divorce).

The answer will depend on when the accident occurred and what the rest of the assets are. Judges must evaluate various factors to determine the property. The amount received in a personal injury settlement award could be deemed marital property, which is eligible for division between the two parties.

Marital property generally refers to all jointly owned assets obtained from the date of the marriage to the date of the separation, including income earned following the marriage. On the other hand, an inheritance or gift from anyone besides your spouse is categorized as separate property.

In a Virginia divorce case, property division can be a very tricky issue, and the arguments should be strategically crafted in your best interest. To understand whether your personal injury settlement award is marital property, consult an experienced Virginia divorce lawyer today.

General Principles

Under Virginia law, a personal injury settlement award may be categorized as marital property, irrespective of whether or not the spouse involved in the accident sustained an injury. In general, a judge will review the reason for your personal injury settlement award, which will establish whether or not your spouse is entitled to the funds you will collect.

• If the personal injury settlement is paid to compensate for pain and suffering, this part of the award will not be deemed marital property. This rule is applicable to payments collected for any disfigurement, disability, or debilitation.
• If the personal injury settlement is paid to compensate for out-of-pocket expenses and other damages, such as lost income or medical bills, the funds will be deemed marital property.
• If the personal settlement award is paid to compensate a claim of loss of consortium from an uninjured spouse, this amount will not be included in marital property.

The above are general principles followed by Virginia courts. Notably, the party that claims that the funds should be considered non-marital property is responsible for providing evidence that the funds are separate.

Financial compensation represents vital support for victims of serious injuries due to another’s negligence. This type of compensation includes personal injury settlement awards, workers’ comp benefits, and disability benefits. Individuals who are unable to work can collect a more substantial share of the injury compensation and marital assets.

Co-Mingling Personal-Injury Settlement Awards

Lawyers must consider whether their clients have co-mingled money from personal injury settlements with marital assets. If the funds are co-mingled with other marital assets, a personal injury settlement award for pain and suffering may be seen as marital property during divorce proceedings.

In case a client wants to ensure that the proceeds from their personal injury settlement award are not considered marital property, they should use a separate account to deposit the funds. The court will determine whether the funds are to be co-mingled with the marital property during the final dissolution. Therefore, lawyers should educate their clients on the repercussions of co-mingling funds from personal injury settlements.

In some states, where community property law applies, you might have lost half of your injury settlement in your divorce to your spouse. But since Virginia follows equitable distribution laws, your personal injury settlement may be protected. Equitable distribution means that your shared property, assets, and debts, will be divided fairly in the divorce. This does not mean that things need to be divided equally. But they do need to be divided equitably.

The Date of Separation

If you were injured prior to your initial date of separation, and you began to seek compensation prior to your divorce, your spouse will likely be entitled to a portion of your injury settlement. However, you may be able to avoid this by agreeing to let go of other property or assets in your divorce settlement that are the equivalent to the amount your spouse may have been entitled to from your injury settlement.

The Damages You are Seeking in Your Personal Injury Claim

Another factor that will need to be taken into account are the damages that you are seeking in your lawsuit. Certain damages are for your sole benefit. While others also impacted your spouse. For example, your physical pain and suffering is yours and yours alone. But your loss of income would also have an impact on your spouse, and they may be entitled a portion of the compensation awarded for those damages.

It should also be noted that if your spouse is seeking spousal maintenance or alimony as part of your divorce settlement, and they are not awarded a portion of your personal injury settlement, this could have an impact on whether you are ordered to pay alimony to your ex. Make sure you have a strong legal advocate on your side who can help protect your injury settlement and your interests throughout your divorce.

Your Spouse Might Testify for the Respondent

Another cause for concern is that your ex will do anything to take action against you. Including testifying for the respondent in your personal injury lawsuit. In this case, your spouse may attempt to make it seem as though you have over exaggerated the extent of your injuries in order to be awarded more money in your lawsuit.

If this happens, it could destroy your credibility and make it more challenging for the court to find the at-fault party liable. Fortunately, your attorney will be prepared to show that you are entitled to full and fair compensation for your damages through witness statements, expert testimony, medical records, and other supporting evidence.

What should my Divorce Lawyer communicate with my Personal Injury Lawyer?

In cases where you arrive at a pre-suit settlement agreement with an insurer, they will usually require you to sign a document known as a release form. The precise wording and matter contained in a release form will depend on the settlement’s specific circumstances and who is drafting the release. This form will contain a specific dollar amount, representing the full and final amount that the insurer will pay you in exchange for signing the release form.

The release form will often not contain an itemized breakdown of the total amount detailing which portion is assigned to which damages. For instance, in the release form, it might be stated that the insurer will pay you $70,000 in exchange for the execution of a general release. They will not specify how much of the $70,000 is compensation for medical bills, pain, and suffering, income loss, loss of earning capacity, etc.

When the court attempts to determine which portion of that $70,000 is marital property subject to division between the spouses, the lack of the settlement amount breakdown can prove problematic. For this reason, if you are injured due to a third-party’s fault during divorce, it is best to inform your personal injury lawyer of your ongoing or intended divorce case.

Speak to the Qualified Attorneys at Olmstead & Olmstead Today

Dealing with an injury accident can be challenging for both spouses. In fact, it may even be a factor exacerbating the divorce. If you sustained injuries in an unfortunate accident and your ex-partner or spouse wants a part of your settlement, the skilled and compassionate attorneys at the law offices of Olmstead & Olmstead, P.C., can help.

Our experienced lawyers will answer any questions you may have on the various aspect of a personal injury claim and how it may relate to an upcoming divorce. We will be happy to arrange a no-obligation initial consultation to establish whether you or your loved one is entitled to a portion of compensation for your injuries. For a free initial consultation with an experienced attorney, call today at (703) 361-1555