It's the law: Personal injury award can be divided in divorce case

Q: I was in a car accident and am in the process of settling my claim for a substantial amount of money. My spouse just filed for divorce and claims my personal injury award is subject to division in our divorce case. Can my spouse get part of my award?

A: There can be a pot of gold in a divorce case represented by something other than the bank accounts or properties owned by the spouses. The pot of gold can include worker’s compensation benefits, personal injury awards, and retirement or disability benefits. Although the spouses may not care who “owns” the gold during the marriage, at time of divorce both may view the gold as an entitlement.

By statute, marital assets and liabilities include: 1. Assets acquired and liabilities incurred during the marriage, individual or jointly; 2. Increase in value of non-marital assets resulting from efforts of either spouse during the marriage or contribution of marital assets; 3. Inter spousal gifts; 4. Vested and non-vested benefits accruing during the marriage in retirement, pension, profit sharing, annuity, deferred compensation and insurance plans; 5. Real property and personal property jointly titled as tenants by the entirety is presumed to be a marital asset with the burden of proof to overcome a presumption of gift is by clear and convincing evidence.

Non-marital assets and liabilities include assets acquired prior to marriage, gifts from persons other than a spouse, income from non-marital assets, which is not commingled with marital assets or used by the parties as a marital asset, and assets that the parties agree are non-marital.

The statute makes it clear that retirement and pension accounts accruing during marriage are marital, even if the account is not yet vested. This requires the courts to determine what portion of the account is marital at time of divorce but avoids an argument as to whether that pot of gold is marital or not. The argument is about what portion of the pot is to be divided between the parties.

Personal injury and worker’s compensation awards are not specifically addressed by statute, but Florida court analyze the components of those awards to determine what portion, if any, is the pot of gold to be divided at divorce. Portions of these awards considered marital property include awards for lost wages or lost earning capacity, awards from medical expenses that have been paid from marital funds and awards for which no allocation can be made. Portions which are solely property of the injured spouse include damages for pain and suffering, and any economic damages occurring in the future (i.e. lost wages or medical expenses).

Allocation among various claims in a worker’s compensation or personal injury case will directly affect the ability of the non-injured spouse to successfully claim the award. That can lead to efforts to structure settlement agreements that limit the non injured by allocating the settlement to the damages solely owned by the injured spouse. When the award is made by trial or hearing officer, the opportunity for “structuring” is limited and with it potential for dispute between the divorcing spouses as to what part of the award is marital.

Unlike personal injury and worker’s compensation awards, disability benefits are not subject to equitable distribution between spouses at time of divorce. This is true even if the disability benefits are obtained through a private disability insurance policy purchased with marital funds during the marriage. It is true even when the spouse’s interest in retirement benefits is extinguished by that spouse’s entitlement to disability benefits. However, if a spouse is drawing retirement benefits at time of divorce and then converts the retirement to a disability pension, the disability pension is considered a replacement retirement pension and courts will not allow that substitution to convert a marital asset to a non-marital asset.

As you might suspect, the facts and circumstances of any particular case will have a big impact on the outcome. I suggest you retain an experienced attorney to discuss the facts of your situation and that you do so promptly. A thorough understanding of your rights and liabilities may help resolve dispute with your spouse and avoid protracted and expensive litigation.

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Fla. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. The information contained in this column is not intended as legal advice. E-mail: wgmorrislaw@embarqmail.com.

© 2008 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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