Personal Injury Settlements And Divorce

who keeps compensation during a divorce

It is not uncommon for a spouse to suffer an injury during a divorce – anything from a car accident to a worker’s compensation claim to medical malpractice. If a spouse receives some form of compensation for the injury that occurred during the marriage, who gets to keep the settlement monies? The question is not as simple as it may appear.

Because the injury occurred during the marriage and the spouse received the settlement funds during the marriage, the property is presumed marital property under Missouri statute. But that is only the beginning of the inquiry.

Missouri courts have held that a trial court must look at the purpose of the settlement funds under what is called the “replacement” theory – what exactly was the settlement amount intended to replace? Typically, a personal injury claim involves awards for past lost wages, past medical expenses, future medical expenses, future lost wages, and certain non-economic damages like pain and suffering. In a worker’s compensation case, a spouse could get a partial or permanent disability award, the latter intended to replace the future earnings a spouse would have made absent the injury.

As you can see, the trial court has a chore separating out the purpose of the settlement award, because it usually combines one or more of these categories. The parties will each want to put forth their own accounting of the funds, but typically the award itself is broken out into categories based on past and future compensation. The part of an injury award designed to repay marital sums expended on medical care or earnings lost during the marriage is marital property subject to division. The part of an injury award designed to replace future earnings or future medical expenses will be the separate property of the injured spouse. For non-economic damages, the trial court needs to scrutinize whether the replacement includes compensation to the spouse for loss of consortium, a legal term that means loss of companionship and intimacy with a spouse because of injury, and a recognition that couples share in the pain of an injury, though not equally.

This last point gets to the one part of the injury award division that is different than the typical equitable presumption in the division of marital property. The court can, in its replacement analysis, decide that more funds should go to the injured spouse if under the circumstances the court finds that outcome just and appropriate.

An injured spouse should take precautions in the settlement of a large personal injury award that compensates for catastrophic injuries that require a trust and guardianship arrangement, particularly if the trustee is the other spouse. To be sure funds go principally if not exclusively for the care of the injured spouse, the injured spouse should have an attorney represent his or her interests separate from those of the other spouse. Good estate planning can also set forth wishes that upon such an injury a trust committee rather than one spouse handle management of the funds.

If you have questions about the division of personal injury awards during divorce, contact us – we can help.