The impact of a personal injury and loss can weigh heavily on a marriage. At times, a divorce can arise out of the aftermath of a tragic incident. Divorce may also be a fact of life that has nothing to do with a personal injury case. In any case, the question may arise as to what happens to the proceeds of an injury settlement or award in divorce. There is a range of law and opinion in community property and common law property states. Community property states presume all the assets of a marriage are community property, which could include a personal injury award. To override the presumption that your spouse will receive half of your injury award, there are several steps you can take to separate proceeds from a personal injury award. Consulting with a Personal Injury lawyer such as the Family Lawyer Collin County TX locals trust can help assist with this process.
The nature and purpose of a personal injury award
One day you may be driving along your route to work or the local grocery store when you are struck by an eighteen-wheeler and suffer significant injuries. You may be unable to walk, work or do much of anything for a short time or forever based on the extent and permanence of your injuries. When you are an income earner supporting a marriage, the loss of wages certainly affects household income and everyone in a marriage and family may suffer. The loss of the vehicle and other property also affects your spouse and any children.
Aside from lost wages and property damage, personal injury damages include pain and suffering, medical and hospital bills, disfigurement and loss of companionship. What if you need to pay for wheel chair ramps, catheters, home healthcare and wheel chairs for the rest of your life? The purpose of a personal injury award is not to create a windfall or annuity for your family, it should be compensation for your current and ongoing personal loss and expenses.
To protect your right to your personal injury settlement or award, consider the following list of strategies you can use to keep your compensation separate from being divided as community property in the event of divorce:
- Coordinate with your personal injury and divorce attorney if possible.
Your personal injury case may take years to settle and a divorce can be finalized in a matter of months. There are no guarantees of the outcome of an injury case and whatever future money you may receive from an injury case should not be part of the divorce and should not delay the finalization of your divorce. Also, your opposing divorce counsel might want you to hurry up and settle your injury case but they cannot force you to do so. Let your personal injury attorney know if you are currently in a divorce or if it is something you reasonably believe may occur.
- Incorporate detailed language in settlement agreements to identify separate property.
When your personal injury attorney negotiates a settlement or where the jury awards money in an injury case, it is important to specifically identify how a lump sum or structured settlement is allocated. Identifying property damage and lost wage compensation individually is helpful in a divorce to the extent that money is viewed as community property subject to equal division. Likewise, your pain and suffering, disfigurement and future medical and special damages are personal and when identified as such, you may be in a better position to have those monies separated from the marital estate in a divorce.
- Negotiate an agreement with your spouse to acknowledge separate property.
Like the conversation one would have in negotiating a prenuptial agreement, you can ask your spouse to sign an agreement acknowledging that part or all your personal injury award be considered separate property in which your spouse may have no claim. If you are contemplating or are already in a divorce, this conversation may be sensitive. It is something worth considering because such an acknowledgement would provide certainty to this issue.
- Avoid commingling the proceeds of an injury award.
If you consulted your attorneys as suggested, they may advise you to not spend any marital money on costs and expenses involved in personal injury. Keep it all separate. When you do receive an award or settlement, regardless of whether you are in divorce or contemplating one, deposit your money in a separate personal bank account. The more efforts you take to identify separate money derived from your personal injury, the better your chances are that you may be able to retain that money in divorce instead of it being divided with your spouse.
- Create a trust to shelter personal injury money.
A great way to hold your injury award money is to lock it down in a trust. There are revocable trusts and irrevocable trusts that shelter your money in a bank or with an attorney who serves as the trustee for dispensing the money to named beneficiaries such as yourself and possibly your children. Trust proceeds are distributed in accordance with the conditions and instructions in the trust document. An opposing counsel in a divorce is going to have a more difficult time persuading a judge to crack into a well-established trust.
Despite efforts to identify and keep your injury award money separate from division in divorce, you may be at the mercy of the laws and judicial propensities in the state and county where you reside and where your divorce may be litigated. Local attorneys know what you can expect, which may vary from state to state, and from county to county. It is important to seek the advice and counsel of an attorney experienced in complex divorce and financial matters.
A special thanks to authors at Scroggins Family Law for their insight into Personal Injury and Family Law.