A personal injury action that arises before or during your marriage can cause confusion when going through a divorce. What will happen to the money you receive from an ongoing or settled personal injury claim?
While this question is fact specific and will depend on each person’s situation, here are three tips for guidance:
- Seek advice from your personal injury lawyer and a family lawyer.
It is very important that you inform your personal injury lawyer of the likelihood of divorce. Take advantage of the expertise of your personal injury lawyer so that he/she can take care when drafting settlement documents to provide a breakdown of damages and make suggestions as to other precautions you should take as well as connect you with a reputable family law lawyer to provide you with specific advice.
- Take precautions.
Request that the settlement is paid into a separate account solely in your name rather than a joint account. Be cautious on what you use your settlement payment on. For example, using it to pay off the mortgage on your marital home is not smart considering the matrimonial home is split upon divorce. Consider signing a marriage contract, which clearly states the settlement is for your use and benefit, and is not included in the family’s net income.
- Keep a settlement as “in pay” rather than lump sum.
In pay is also referred to as structured settlement (SS) annuity payment, which means a personal injury tort is resolved by receiving all or part of a settlement in periodic payments. In the recent case of Hunks v Hunks, the Court of Appeal decided that SS annuity payments should be considered income and did not fall within the meaning of “property” under the Family Law Act. “Property”, under Part 1 of the Act, is defined as any real or personal property acquired during marriage; and such property can be divided equally between spouses. Thus, this decision means that SS annuity payments, unlike other annuities, are not sharable with your spouse when the marriage breaks down. However, you can expect that your SS annuity payments will be included when assessing income for spousal support, analogous to disability benefits.
Virk Personal Injury Lawyers are here to help. If you have questions on how this information might relate to you, please contact us.