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March 01, 2017

Do personal injury awards count as marital property?

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Posted in Wisconsin Workers Compensation Related News

Personal injury awards are separate individual property not included in marital property in divorce.

The general rule in most states is that If you receive a personal award of money damages, such as a personal injury award, that money may considered separate from the community/marital property in a divorce. There is a general presumption is that all property and assets acquired during the marriage will be divided equally between the divorcing spouses. Any property that is not classified as community property is called usually called individual or separate property, and is not to be divided in the divorce.

Spouses may keep their individual property separated which should not be divided in a divorce. When there is a disagreement over whether property is community property or separate property, there might be a hearing and trial to determine how the property should be classified and whether it is subject to division. There are difficult decisions in divorce, especially where property is concerned.

The general rule in community property states is that property acquired by either spouse during marriage is divisible in a divorce. The exception is that an individual may keep separate property and the property will not be divided in the divorce if it was:

  1. owned or claimed by the spouse before marriage;
  2. acquired by the spouse during marriage by gift, devise, or descent; and
  3. coming from a pain and suffering award in an injury case, except for any award for past wages, which are considered marital and part of the marital property.

In addition to these general rules and exceptions, individual states may have specific rules to address different circumstances such spouses in military service, for example.

It is important to consult an experienced divorce attorney Collin County TX relies on if you have questions about separate and community property in a divorce.

During a marriage, it is a good idea to keep separate money in a different account from the marital money, to preserve the separate and individual nature of that specific money. A divorce can be more complicated if individual/separate property is commingled with the marital/community property money. For example, if you receive a personal injury award in the amount of $10,000 and you spend it on boat that costs $40,000. To separate the personal injury money (separate property) in a divorce, a judge could order the boat be sold to resolve the problem of property being classified as part separate and part community.

To avoid selling property and risk losing value, it may be better to reimburse the other spouse for separate property they have a right to receive in a divorce. This is often called an offset. Many of the issues of property distribution in a divorce can be settled outside of court, avoiding hearings and trials that can be lengthy and expensive.

Thanks to our friends and contributors from Scroggins Law Group for their insight into marital property.

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