high asset divorce

Splitting a Personal Injury Settlement Award in a Divorce

If I have a settlement from a personal injury case, is that factored into my assets?

Divorce cases can be complicated legal processes when valuation and ownership of marital and personal property are at issue. How this is determined is largely dependent on the state of residence for the divorcing couple and the state application of community and personal property laws.

There are nine community property states that view all assets and liabilities that a married couple share as equally owned by both spouses. Separate property states take a different approach when evaluating personal and marital property. Assets and liabilities of divorcing couples can be categorized in a variety of ways, especially when there is a family business or combined assets used to make certain purchases or investments. Division of property can be even more complicated when it comes to personal injury settlement awards.

Personal Property States

Personal property states almost always allow an injured spouse to retain the percentage of their personal injury settlement that they received as compensation for pain-and-suffering with the help of a skilled personal injury lawyer (Memphis, TN)¬†relies on. However, any portion of the settlement that is reimbursement for lost wages is normally considered joint property. Problems can arise when any of the personal property component of a settlement was used to make a major purchase like a home or finance a spouse’s educational advancement. This is especially true when it has been some time since the settlement was paid.

Community Property States

In some instances, a company property state will declare a portion of a personal injury award as personal or non-marital property if the timeline on the injury and the payoff are not both within the years of marriage. Personal injury settlements that are the result of an injury that occurred during the marriage normally are distributed equitably.

Personal Agreements

Prenuptial agreements are common in almost all states regardless of their marital property law. These agreements are usually valid enforceable contracts. They can include a personal injury settlement award agreement which is not considered joint property.

Dividing Liabilities

Assets of a divorcing couple are not the only financial consideration in determining disposition of a personal injury settlement. Many times when actual property cannot be divided equally it is necessary for one party to buy the other spouse out of the entire asset/liability division. In this event, while the injured spouse who owns the personal injury settlement may have significant funds to help satisfy liabilities, the other spouse could conceivably receive a portion of the settlement in a final agreement when a totality of the financial circumstances of the divorcing couple are presented in court.

An amiable and structured financial agreement by divorcing couples can be the best method of avoiding a court ruling on division of assets, including personal injury awards. Personal injury lawsuit proceeds are funds that can be ruled upon by the court based on the finances of each spouse. Having an experienced attorney can be a real advantage when entering into a divorce agreement that includes a personal injury settlement award.


Thanks to our friends Patterson Bray for their added insights into splitting a personal injury settlements in divorces.