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Divorce doesn’t have to be bitter. But if there is one aspect of separating from your spouse that can bring about problems, it’s dividing property. When it comes to property division, you may think about a house, cars, bank accounts, and furniture. But you will also need to consider less common forms of property, like personal injury settlement. In this article, we will discuss how this money might be divided in your divorce, and how you can protect whatever amount is considered yours.
How Property Is Divided in a New York Divorce
When it comes to divorce, the law views a marriage as a business partnership. During your marriage, you and your spouse will have acquired assets and probably debts. Since you did this while you were married, these decisions are like business decisions, making you and your spouse responsible for their outcomes. In practice, this means you and your spouse each have an interest in the property you acquired during your marriage. Now, think about divorce as ending a business. If you were to end a business, you would want to divide the business’s assets and debts between you and your business partner. Similarly, in a divorce, the law says you need to divide the marriage’s assets and debts between you and your spouse. This is known as property division.
When the court divides your property, they first have to figure out what is “marital property” versus what is “separate property.” “Marital property” is property that was acquired by you or your spouse during your marriage, meaning between the date of your marriage and the date either you or your spouse filed for divorce. “Separate property” is property that you or your spouse acquired before you were married or after one of you filed for divorce. Since the court views your marriage as a business partnership, they only need to divide the property that both you and your spouse have an interest in, which is the marital property. So, you and your spouse will each keep your separate property. And the court will divide your marital property.
How do they do this?
New York’s divorce laws use a method known as “equitable division.” This means that the court will divide the property according to what is fair to both parties. Notice that fair does not necessarily mean equal. Many people mistakenly believe their marital property will be divided equally between them and their spouse. This is because in many other states, like California, equal division is the rule. But this does not apply in New York.
To decide how to fairly divide the marital property, the court will rely on the following laundry list of factors:
- You and your spouse’s income and property at the time you married and at the time either of you filed for divorce
- The length of your marriage
- Your and your spouse’s age and health
- The need of whoever will have custody of the kids to occupy or own the marital residence and to use or own its household effects
- The loss of inheritance and pension rights upon dissolution of the marriage as of the date of dissolution
- The loss of health insurance benefits upon dissolution of the marriage
- Any award of support
- You or your spouse’s direct or indirect contribution to acquiring the property
- The liquid or non-liquid character of all marital property
- The probable future financial circumstances of you and your spouse
- The tax consequences to you or your spouse
- Your or your spouse’s wastefulness concerning a particular asset
- If you or your spouse transferred or interfered with property to avoid it being divided
- Whether you or your spouse have committed an act or acts of domestic violence against the other spouse and the nature, extent, duration, and impact of such act or acts
- Any other factor which the court finds to be just and proper
A final point: An alternative to having the court divide your marital property is for you and your spouse to come to an agreement. In that case, you and your spouse can divide the marital property however you like.
Is a Personal Injury Settlement Marital Property or Separate Property?
By now it should be clear that whether your personal injury settlement is considered “marital property” or “separate property” will affect how it is divided in your divorce. Figuring out how to classify your settlement can get tricky. Here are three factors to consider:
- When you were injured and/or compensated
- What type of compensation you were awarded
- Where you stored the money you were awarded
When You Were Injured and/or Compensated
The first thing to consider when deciding whether property is marital or separate is when it was acquired. If you were injured and compensated for those injuries during the time you were married, your personal injury settlement may be considered marital property, depending on the other two factors. On the other hand, if you were injured and compensated before you were married or after you or your spouse filed for divorce, your settlement is probably going to be considered your separate property.
What Type of Compensation You Were Awarded
The type of compensation you were awarded can affect how your settlement is divided in a divorce. Most types of compensation awarded in a personal injury settlement are considered to be separate property. This includes things like medical expenses, pain and suffering, and money the at-fault party is ordered to pay as punishment. However, the portion of your settlement compensating you for lost wages or loss of earning capacity is typically considered marital property that the court will divide. This is because both you and your spouse are considered to have had an interest in wages earned during the marriage. So, you both have a stake in any lost wages from during that time.
Where You Stored the Money You Were Awarded
Anyone involved in a divorce should be aware of the concept of “commingling.” This is when separate and marital property gets mixed up in a way where it is nearly impossible to figure out what portion of it is separate and what portion is marital. A bank account is the perfect example. If you had $1,000 in a bank account before you got married and then used that bank account while you were married, it would be impossible to know at the time of divorce how much of that money is marital versus how much is separate. This is because the $1,000 that was your separate property, since it was from before you married, is now gone. Marital money went into the account and marital money went out of the account. When you mix marital and separate money, it can become commingled. The result is usually that the money is considered marital property that needs to be divided.
How Does This Affect a Personal Injury Settlement?
In the last section, we said that money from your settlement for medical expenses, pain and suffering, and punishment for the at-fault party is your separate property even when you are awarded the compensation during your marriage. But this might not be true if that money becomes commingled, meaning you mixed it with marital money or other marital property. For example, consider the real-life case of Rosemarie R. v. Manuel R.
During his marriage, Mr. Manuel invested a portion of his $31,000 personal injury settlement into his marital home. When he and his wife got divorced, he claimed he should retain the portion of this money that was his separate property. The court disagreed. They pointed out the “presumption of marital property,” which means that property acquired during the marriage is considered marital property unless either spouse can prove otherwise. By investing the personal injury money into the marital residence, Mr. Manuel commingled his “separate” personal injury settlement with a “marital” asset, the marital home. Since he was unable to trace the separate money back, the court determined the money had become a marital asset.
So, where you stored your personal injury settlement money might determine whether it’s marital or separate property.
How Should Divorce Affect Your Decision to Pursue a Personal Injury Case?
Divorce should not prevent you from pursuing a personal injury case for two reasons. Firstly, the only consequence of a divorce on your personal injury settlement is that a portion of it might be divided between you and your spouse. But this does not justify not pursuing a personal injury case at all. If you have been injured in an accident, you may be eligible for considerable compensation. This compensation is not just a pay day. It is meant to help you with your practical expenses caused by your accident. This means that it is money you probably need.
And even a fraction of a personal injury settlement is a far better outcome than not being compensated for your injuries whatsoever.
A second reason is that you and your spouse don’t have to rely on the courts to divide your property. It is possible that you and your spouse could come to an agreement in which you keep most or all of your personal injury settlement. In light of these two reasons, it doesn’t make sense to forfeit money you are owed simply because you might have to share some of it with your spouse.
Can You Avoid Dividing Your Settlement Money by Waiting Until After Your Divorce?
What we know so far is that there are many circumstances under which your spouse can be entitled to a portion of your personal injury settlement. An interesting question is what happens if you wait until after your divorce is finalized to start your personal injury case. After all, once your divorce is finalized, the property will have been divided. So, in theory, your spouse might have no claim to your settlement later on. This question is probably best answered by your divorce attorney. But let’s consider some reasons why this tactic might not be such a good idea.
Regardless of when you start your personal injury case, if you were injured during your marriage, your spouse probably has a claim to a portion of whatever you might be compensated. Remember that your spouse has a claim to compensation for lost wages if they were incurred during the marriage. So, at least in theory, it seems your spouse has a claim to some of your personal injury settlement even if you start your personal injury case after your divorce is finalized.
Now, the next question is how will they make a claim to this money? One way is by bringing it up during the divorce proceedings. It is possible for the court to say in your divorce judgment that you or your spouse is entitled to a portion of whatever money you are awarded in this future personal injury case you might bring. Another way is if your spouse takes you back to court after the fact. This could go badly for you. The courts look down on either spouse hiding things in the divorce proceedings or otherwise acting dishonestly. If the court feels you intentionally avoided addressing the personal injury case to avoid having to split the money with your spouse, they might punish you by awarding a larger portion of it to your spouse than what they would have if you brought it up to begin with.
Frequently Asked Questions
Yes. A spouse can ask for a court to classify a personal injury settlement as a source of income rather than as property. This is usually done to increase the amount of alimony, or spousal support, the other spouse must pay. It is also used to get more money for child support.
The key to protecting your personal injury settlement money is to avoid commingling it with other marital assets. One easy way to do this is to put it in a separate bank account, away from marital money.
In most cases, a court will observe a valid prenuptial agreement. This is when two spouses agree to certain terms, such as who will keep what, before they get married. If your prenuptial agreement specifies that you or your spouse will keep something like a personal injury settlement, you may not have to divide it as marital property.
There are two main ways to keep your personal injury settlement in a divorce. One way is to come to an agreement with your spouse. Another way is if it is considered “separate property.” This can happen in a few ways. Perhaps you were injured before marriage or after one of you filed for divorce, or you were not compensated for lost wages or loss of earning capacity.
Who Should You Contact?
If you are either considering pursuing a personal injury case, or are involved in a divorce and want to protect your rights to your personal injury settlement, you should speak about your case with a qualified attorney. A talented divorce attorney can help you achieve the best possible outcome in your divorce. And the excellent personal injury attorneys at Rosenblum Law can help you achieve the compensation you deserve in your personal injury case. E-mail or call 888-815-3649 for a free consultation.
Additional Resources
- Divorce Information & Frequently Asked Questions
- How to Avoid Commingling Funds During Marriage
- Dividing Property in a New York Divorce
Last updated: Oct 11, 2021
