Personal injury settlements are reached as a result of a car accident, work accident, medical malpractice or other claim. They are personal because they are related to an injury to your body, mind or emotions. We are often asked whether personal injury settlement funds can or have to be split in a divorce. This question arises even though the other spouse may not have been injured or involved in the accident. The answer to this question is that “it depends.”
It depends a) when the injury occurred; b) for what the personal injury settlement or funds were paid, and c) how the funds were maintained or used.
When the Injury Occured
The personal injury settlement is considered the separate property of the injured spouse if the injury occurred before marriage or after the spouses separated. If the injury occurred during the marriage and before the parties separated (even if the proceeds were paid after date of separation), the personal injury settlement may be marital property.
Why Was the Personal Injury Settlement Paid
Personal injury settlements paid for economic losses are usually marital if the injury occurred during the marriage. Economic losses include lost wages, loss of earning capacity, and medical expenses. Personal injury settlements paid to cover economic losses enable the injured spouse to provide for their family as they presumably would have done had they not been injured. Money paid for non-economic losses are usually the separate property of the injured spouse. Non-economic losses include pain and suffering and disability.
How the Funds Were Maintained or Used
Any separate property of a spouse may be gifted to the marriage and made marital. So even if proceeds from a personal injury settlement or court award would be the separate property of the injured spouse, if they were gifted to the marriage they would become marital. An example of this is paying off the mortgage on a home that is owned by the marriage (titled as tenancy by the entirety).
Under North Carolina law, an equitable distribution is presumed to be an equal distribution. However, N.C. Gen. Stat. 50-20(c) specifies fourteen factors the court may consider to make an unequal distribution. As part of this, a court may award the greater portion of the settlement or proceeds to the injured party.
If you are going through a separation or divorce and there is a personal injury settlement/award involved, give us a call. We can help you.