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Is a Personal Injury Settlement Divided in a Divorce?

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California operates under the community property doctrine when dividing assets in a divorce. This rule means that anything of value acquired during the marriage is split 50/50 between the spouses. But things can get complicated if you were involved in an accident and awarded personal injury damages (or a settlement).

Because you were the one who was injured, is the settlement considered separate property and the entire amount granted to you in a divorce? Or is it community property and divided equally between you and your spouse?

The answer to those questions depends on the situation. Your personal injury settlement may be considered separate property, in which case it’s yours. However, it may be deemed community property, and your spouse may be entitled to some of it unless an exception exists.

Property division matters are complex, and if you are seeking a fair resolution to your case, it would be helpful to retain the services of an attorney who can assist in protecting your best interests.

At Claery & Hammond, LLP, we provide legal representation for family law matters in Los Angeles. Please contact us at (310) 817-6904 to schedule a consultation.

Asset Division in a Community Property State

In a community property state like California, assets considered community (or marital) property are divided equally in a divorce. The doctrine does not necessarily mean that everything will be split down the middle. Instead, it provides that each spouse should receive equivalent values of assets.

The community property rule applies only to community property. That is, anything acquired during the marriage.

Separate property is not divided equally. Instead, the spouse who solely owned the asset gets to keep it. Separate property includes anything one spouse acquired before the marriage or after the separation. It can also consist of gifts or inheritances received only by one spouse while married.

In some cases, assets can be both community and separate property. This can happen when one spouse’s separate property is mixed with the couple’s community property.

Is a Personal Injury Settlement Separate or Community Property?

You might have been awarded a personal injury settlement if you were injured in an accident, such as a car crash, caused by another individual’s negligence or recklessness. It covers damages arising from the accident, such as lost wages, pain/suffering, and medical bills.

If you were the only one injured, it would seem, that the entire settlement amount should be awarded to you in the divorce. But that’s not necessarily how California’s laws operate. Whether you get to keep all of your financial recovery depends on whether it's separate or community property.

Under California Family Code § 781, a personal injury settlement is considered separate property if the accident happened:

  • After the divorce was finalized, or
  • When the injured party was living separately from their spouse.

If your situation falls under one of those two categories, your settlement would not be divided in your divorce. However, you may be ordered to reimburse your spouse if they used any of their separate property or community property to cover accident-related expenses before you were awarded damages.

A personal injury settlement may be considered community property if your accident happened while you were married (California Family Code § 780). Under the community property rule, your settlement can be subject to a 50/50 split between you and your spouse.

However, California Family Code § 2603(b) provides an exception to the equal division doctrine. It states that a personal injury settlement should be awarded to the injured spouse. In other words, you were injured, so you should get the full amount.

Although this exception exists, it’s still possible for your spouse to receive some of your settlement. Section 2603(b) goes on to state that a portion of the amount can be assigned to the non-injured spouse if the court determines that doing so is in the “best interest of justice” after considering the financial needs and situation of each spouse.

Should the court award your spouse some of your personal injury settlement, they cannot give them any more than 50% of the damages.

Of course, you and your spouse can avoid having the court decide how damages are divided by drafting an agreement indicating who will receive them. The court would still have to review your arrangement and approve it before it’s finalized.

Schedule a Consultation with Claery & Hammond, LLP

Although California is a community property state, it may be possible to keep a personal injury settlement awarded to you for an accident during your marriage. But it’s also possible damages will be divided between you and your spouse. Speak to an attorney about your situation to learn about your legal options.

Contact our Los Angeles team by calling (310) 817-6904 today.

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