Is a Personal Injury Settlement Part of Marital Property in a Divorce?
Divorce case proceedings are often complex. This complexity increases even more when it is intertwined with a personal injury claim. If you are in the middle of a divorce but also expect a personal injury settlement award, you may be understandably concerned about your ex-partner’s entitlement to your settlement amount.
It is natural to wonder about the extent to which a spouse is entitled to claim personal injury funds in Kentucky. Sadly, there is no absolute answer. The following sections throw light on the key aspects of how personal injury proceeds are dealt with in a Kentucky divorce.
Personal Injury Settlements and Divorce in Kentucky
The nature of the personal injury settlement award will determine whether it is included in a divorce judgment. For instance, if the payment is for previous medical expenses paid with marital funds, the settlement proceeds will be subject to division as a part of the marital estate. Conversely, if the settlement award is for pain and suffering, the funds belong only to the injured party. Assessing the purpose of the payment can help understand whether it is marital property or separate property.
The labels placed on the settlement are crucial. Parties to the personal injury settlement need to be mindful of the labels put on the settlement proceeds as this may be vital later on during divorce proceedings. Further, the co-mingling of the settlement proceeds with marital funds can convert them from non-marital property to marital property.
Personal injury Settlement Proceeds Division by Category
Personal injury settlement money gets divided in a divorce in the following ways:
The Injured Spouse’s Separate Property
This category includes personal injury settlement awards for disability, pain and suffering, loss of future wages, future medical bills, and loss of lifestyle after the accident.
The Non-Injured Spouse’s Separate Property
Personal injury settlement awards related to the loss of consortium are fair game for the non-injured spouse (the loss of companionship they suffered due to their spouse sustaining injuries).
Marital Property
Any funds for which an allocation has not been made, such as personal injury proceeds for loss of income capacity during the marriage, and medical bills paid out of joint funds, will be a part of marital property. The court will divide these compensatory damages equitably between the divorcing spouses.
Funds without a label are subject to distribution as marital property. The purpose of settlement funds is vital for both partners in a marriage. Without a designation, the funds from a settlement award are considered marital assets and are subject to equitable division during a divorce.
Equitable Distribution by Courts
Simply because personal injury settlement proceeds may be distributed as a part of the marital assets, it does not imply that each partner will receive an equal portion. Under Kentucky law, courts are required to divide the marital estate equitably.
The court must assess all pertinent facts and circumstances related to the case, including the fact that the proceeds came into the marital estate due to a personal injury claim. According to the law, the court can consider each party’s contributions to the marital estate and any other elements necessary to ensure justice and equity between both spouses.
The Component of Lost Wages in Spousal Support Awards
The damages paid for lost wages belong solely to the injured party. However, the judge may include the proceeds when making an alimony award. As the purpose of lost wages is to compensate for what the injured person would’ve otherwise earned, KY law treats compensation as income earned for alimony determinations.
The purpose of lost wages is to compensate for what the injured person would’ve earned. Thus, KY law treats damages for lost wages in the same manner as earner income to determine spousal support. The court will assess lost wages as a factor in the determination of an alimony award.
Purpose of Kentucky Personal Injury Proceeds Division in Divorce
The treatment of personal injury proceeds in a divorce case in Kentucky is to ensure equitability between both spouses. The law in KY does not want to unjustly enrich the non-injured partner by awarding them funds intended as compensation for an injured person.
But when one spouse sustains injuries in an accident, both partners experience suffering and lifestyle changes to a certain degree. Therefore, the court tries to make an equitable division while still being aware that the law establishes specific categories of funds as separate and marital property.
Legal Help with Your Property Division in a KY Divorce
You should promptly consult an experienced family law attorney if you face divorce and believe that your ex will attempt to make a claim on your personal injury settlement proceeds. Similarly, if you feel that your soon-to-be ex-partner plans to conceal money from a personal injury settlement, you should consult a lawyer who can apprise you of your rights.
At the law offices of John H. Ruby & Associates, we have extensive experience providing clients skilled counsel on their divorce rights in Kentucky, and we are ready to go to work for you. For a no-obligation consultation with a seasoned divorce attorney, call today at (502) 895-2626.