Divorce & Annulment Article


What Happens to Personal Injury Proceeds During Divorce?

The period of time between filing for divorce and actually getting divorced is a land field of potential issues when it comes to property issues in divorce. The general rule is that money earned after the service of the petition for dissolution is separate property not subject to division upon divorce. But, if money isn’t earned but is instead awarded pursuant to an insurance policy, it may be community property subject to division upon divorce. The type of award, and purpose of the insurance will determine whether the insurance payout is community or separate property.

Disability insurance.
Disability insurance is usually paid out to cover medical expenses, general expenses or lost wages. If the policy was purchased during the marriage and the injury happened during the marriage, Arizona courts have held the proceeds are community property.

Unemployment Insurance/ Workers Compensation
The same logic can be applied to unemployment insurance or workers compensation claims. Insurance for losses to the community, like wages, are community property.

Car or Fire Insurance

Was the underlying car or structure community or separate? If your separate car was in an accident and you receive money to replace the vehicle, the funds are arguably separate funds. If the marital home is burned down and a check is issued to replace the home, the funds are likely community and subject to division.

Personal Injury Funds
If a personal injury to one spouse results in medical expenses and lost wages to the community, the recovery of these expenses are community property. However, if a spouse is being compensated for their personal pain and suffering or the loss of a limb or other personal loss, this recovery will be treated as separate property, and not divisible upon divorce.

This is true even if an injury happens after the service of a petition for dissolution. The community continues to exist until an actual divorce.

In general, all property acquired by either husband or wife during a marriage is community property. The exceptions are for gifts and inheritance. Insurance proceeds are not gift or inheritance, so the basic question begins with what are the insurance proceeds compensating?
 
If the funds are compensating you for a loss to your body, you brought your body into the marriage and are entitled to it upon divorce. Your spouse has no claims to your award for pain and suffering.

This means an attorney must make a very careful analysis of the complaint, the judgment and the terms of any personal injury settlement or the terms and purpose of the insurance policy. Additionally, you may want to make a careful accounting of the medical expenses and lost wages to the community and argue anything above and beyond the loss to the community is a personal loss for the individual who suffered the loss.

This can be a very tricky area and the arguments should be carefully crafted in your favor. Consider consulting with an experienced attorney on issues related to insurance or personal injury proceeds.

Contributing Attorney:
Billie Tarascio litigates family law and domestic violence cases at Modern Law.

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QUESTIONS

  • My wife and I are currently going through a divorce. She opened a separate checking account before I filed but transferred her check to her new account afterwards and didn’t inform me about it until payday because we both get paid the same week. I need to know if she’s in violation of a court order because it was my understanding that you cannot hide funds, get loans etc. until the divorce is final??
  • I've filed for divorce, have served my husband with those papers and am now awaiting my parenting class that is just over a week away. Upon my completion of the class, can the court deny my divorce if my husband does not attend his class?
  • How do I get the status of my divorce? My husband filed and said he took care of everything and I didn't need to do anything.
  • I got married in Arizona, but we moved to another country. If we want to divorce, do we have to come back to Arizona ?
  • If I am the respondent . what name goes in the person filing on the form myself the respondent, or my spouse the petitioner
  • I am trying to get a contact number for the clearinghouse. I am retired military my ex wife qualifies for 42.5% of my military pay. When we the divorce was final my lawyers had the spousal maintenance taken out of my military pay instead of my civilian pay that was corrected this month now they are taking money out of my civilian pay but no one sent anything to DFAS so they are still paying her 1000 dollars a month and they are also taking 1000 from my civilian pay the court order says tha I will pay 1000 dollars a month spousal maintenance and she gets 42.5 percent of my retirement not 2000
  • I brought my company into the marriage. It grew while we were married. Is it considered community property. She did not work for the company
  • My husband was deported to the UK after a conviction for domestic violence. He cannot return to the US. Our marriage is not legal there. Therefore he is not married. Do I have to get a divorce? And if so, how can I serve him when I don't know where he is?
  • Igot marry like 2years ago andhe just useme to Clem mykids he got 8000.00 eight thousand back we where to gather for 1 mouth can u. Help me feel free call me 6026722595 Erica thanks
  • Under the Uniform Services Former Spouses Protection Act, the 2017 Rule. If my former wife and I made a verbal agreement to split retirement pay 50/50, will DFAS honor that or would they need a court document stating the amount she would receive?

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