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How Personal Injury Settlements Are Handled in Divorce

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Any divorce case is a complex proceeding. Divorce becomes even more complicated when it’s intertwined with a personal injury settlement. When a personal injury settlement coincides with a divorce, the parties understandably want to know what happens to the personal injury settlement. Here’s what you need to know about how personal injury settlements are handled in a divorce. We talk to personal injury attorney and expert Jack Bernstein about this complex legal proceeding.

Is a Personal Injury Settlement Part of a Divorce Proceeding?

Yes, a personal injury settlement is part of the conversation in a divorce proceeding. Whether the settlement is subject to distribution in the divorce proceeding is a complex question.

Under Florida law, there are three possibilities: the settlement is subject to distribution, the settlement is not subject to distribution, and only part of the settlement may be subject to distribution. What happens in a particular case depends on the specific facts of the case.

Florida Law for Personal Injury Settlements and Divorce

Whether a personal injury settlement is a part of a divorce judgment depends on the nature of the payment. For example, if the payment is for past medical bills that were paid with marital funds, the payment is subject to distribution as part of the marital estate. On the other hand, if the compensation is for pain and suffering, it belongs solely to the injured party. You must look at the purpose of the payment to know whether it’s a part of the marital estate.

Because the reason for the settlement money is significant, the labels placed on the settlement are also very important. The parties to the personal injury settlement should be mindful that the labels placed on the settlement funds may be very important later on in the event of a divorce. In addition, even if funds may be non-marital initially, co-mingling the funds with marital funds can convert them to joint property.

Division of Personal Injury Money by Category

Here is how personal injury settlement money gets divided in divorce:

Separate property of the injured spouse – Payments for disability, loss of lifestyle after the injury, pain and suffering, future lost wages, future medical expenses

Separate property of the non-injured spouse – Loss of consortium

Marital property – Current lost wages, lost income capacity during the marriage, medical expenses paid out of marital funds, funds for which no allocation is made

If the funds come without a label, they are marital property and subject to distribution. For both spouses in a marriage, the purpose of the settlement funds is very important. When the funds come without a designation of what the payment is for, the funds are marital money and distributed during the divorce.

Remember, It’s the Court’s Job to Make an Equitable Award

Just because personal injury settlement funds may be distributed as part of the marital estate doesn’t mean that each spouse is going to receive an equal share. Florida law 61.075 calls on the court to make an equitable distribution of the marital estate.

The court is able to take into account all of the relevant facts and circumstances in the case, including the fact that the funds came to the marital estate because of a personal injury. The law says that the court can consider each party’s contributions to the marital estate and any other factors that are necessary to fashion equity and justice between the parties.

Considering Lost Wages Compensation in Alimony Awards

Even though funds paid for lost wages are the sole property of the injured party, the judge may consider the funds when making an alimony award. Because the purpose of lost wages is to make up for what the injured party would have earned, Florida law treats compensation for lost wages the same as earned income when it comes to determining alimony. The court considers the lost wages as one factor when it determines the alimony award.

Purpose of Florida Distributing Personal Injury Awards in Divorce

The purpose of Florida’s treatment of personal injury awards in divorce is to do justice between the parties. Florida law doesn’t want to unfairly enrich the non-injured spouse by awarding them a windfall of funds intended to compensate someone with injuries.

However, when one spouse is injured in a personal injury accident, both of the parties have lifestyle changes and suffering to some extent. That’s why the court has the leeway to make an equitable distribution while still understanding that the law earmarks certain classifications of funds as joint and separate property.

Cases About Distribution of Personal Injury Funds in Divorce in Florida

The seminal case discussing divorce and personal injury settlements in Florida is Weisfeld v Weisfeld, 545 So.2d 1341 (1989). The case involved a long-term marriage where the husband earned $30,000 as a psychologist employed by a county government. He suffered a work-related injury and was eventually paralyzed. He received a $150,000 workers compensation settlement. At trial, the husband testified that the award was for current and future medical expenses. There was no other evidence about the purpose of the award.

The Weisfeld court took the opportunity to clearly state what types of funds are marital property and subject to division. They said to use an analytical approach when determining whether to declare the settlement funds marital. The Weisfeld court instructed the trial courts to look at the nature of the payment to decide whether the funds are marital and then make a division that’s fair for both parties.

Advocating for Your Client

When personal injury settlements and divorce intertwine, it’s important to begin advocating for your client as early as possible. How you structure or even label the personal injury settlement can have a profound impact on the disposition of the funds in the divorce proceeding.

Ultimately, the goal of the court is to neither unfairly enrich the non-injured spouse or leave the non-injured spouse to bear the burdens of the injury alone. There are two components to argue effectively for a client; the attorney must argue for appropriate classifications of the funds and then argue for equitable distribution of marital funds in the judgment of divorce.