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What happens to money you get from a personal
injury settlement if you go through a divorce?
The answer depends on a variety of factors, including the way the money was allocated in the settlement, the date of the injury, the date of your divorce and/or when you and your spouse first separated.
In general, any money earned after the service of divorce papers is not subject to the division of property. If that money is awarded pursuant to an insurance policy instead of earned, however, it could be considered community property and therefore subject to property division. The determination of community versus separate property depends on the type of award.
Disability insurance covers medical expenses, lost wages and other general expenses. If the policy was purchased during the marriage and the injury happened during the marriage, the proceeds would likely be considered community property. However, if the policy was purchased before or after the marriage, the proceeds would be separate property.
These same principles may be applied to workers’ compensation benefits and unemployment insurance.
Car and fire insurance
Was the vehicle or structure involved in the accident community or separate property? If you owned a car before the marriage and purchased it with your own money, it is separate property. Thus, if that car was involved in an accident and you received money to replace or repair it, you could argue that money should be considered separate property.
On the other hand, if your marital home burns down and you are awarded money to replace it, those funds would be considered community property. This is because the money is going toward an asset owned jointly by you and your spouse.
Personal injury awards
If a personal injury leads to medical expenses and lost wages “to the community” (meaning it affects both spouses), any money awarded to compensate those expenses would be community property. However, personal pain and suffering damages or money meant to compensate the victim for a personal loss will be treated as separate property and would not be subject to property distribution during a divorce.
Note that this is true even if an injury occurs after the divorce papers have been served. The “community” aspect of the relationship continues until the divorce is finalized.
In short, these are complex issues. It’s wise to work with an attorney who is experienced in the principles of separate versus community property—and how those principles relate to personal injury matters. For the guidance and advice you need, speak with a skilled New York personal injury attorney at Robinson & Yablon, P.C.