Personal Injury Assets in a Divorce

It is the charge of the trial court in a divorce proceeding to oversee equitable distribution of the marital estate. They have broad discretion in this matter, determining division of joint property and choosing to award the property of one spouse to another in any fashion that serves the ultimate goal of fairness.

The Process

The first step is the determination of which property is jointly held and which property is separately owned by one spouse or the other. Jointly held property is generally defined as property acquired during the term of the marriage, while property brought to the marriage by one party is considered to remain personal. A few jurisdictions consider all property to be joint property. After determining what is to be considered jointly held, the court must determine the value of the property and devise an equitable distribution.

When a personal injury settlement comes into play, then, the initial question issue that applies is the date when the recovery for the injury was received. If it preceded the marriage it is not ordinarily construed as marital property. Many jurisdictions also have specific statutory provisions that property acquired after final separation or divorce may not be considered in determining the proper division of the marital estate.

Breaking the Settlement into Components

Recovery for a personal injury that is received during a marriage is treated in a variety of ways. Some jurisdictions consider it marital property. A few look on it as personal property of the injured spouse. But in a large number of jurisdictions, the settlement accrued during the marriage is examined by component to ascertain what portion of it constitutes marital property and what might be considered personal to the injured spouse. This "analytic" approach looks at the proceeds of the settlement and determines what portion applies to the marital estate: e.g. lost wages and medical expenses incurred during the marriage. The personal portion of the settlement might be compensation for bodily injury or personal pain and suffering. Proceeds compensating for a loss of consortium are also considered the injured spouse's property. A few jurisdictions have specific statutory designations on the division of personal injury proceeds.

In cases where the settlement accrued during the marriage is not put to the "analytic" test, in most cases it is considered marital property it falls to the injured spouse to prove the claim that some portion of the proceeds should be personal. There have been findings on both sides of the issue.

The Usage of Recovery Proceeds

Usage of the recovery proceeds can have an impact on the court's decision. Where the recovery funds have been commingled with marital property, for example by placing it in a joint account or using it to acquire property that is held in joint ownership, the recovery proceeds have been held to be marital property. Ohio has a statute which provides that commingled recovery assets remain personal property unless the separate property cannot be traced. The burden of tracing the property falls to the claimant. There have also been converse findings, however, which held that commingling did not constitute conversion of personal property to marital property.