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.

Comments:

QUESTIONS

  • Can I get an annulment if my husband sexually abused his step-daughter (my daughter)? He has not been charged but there is an open case with the city of Phoenix detectives. CPS is also involved. There is an order of protection which he has been served. He has left the state to avoid being questioned and going to jail due to not following the order of protection.
  • Wife left three years ago. No legal separation or divorce. We verbally agreed on money and custody. I bought her out of joint house and own it myself. She now demands money for medical for son. I give her willingly 120 a month. She wants more. Can she sue me?
  • When my wife and I separated she gave me a noterized letter stating I had met all my financial obligations of the household we shared. Now that we’re proceeding with divorce she is trying to say I owe a bunch of money in loans she took out from her family. Will the noterized letter defend me if we go to trial?
  • My wife is asking for a divorce. Do i have the right to ask/make her change her last name, in the divorce decree?
  • I am in grad school for nurse anesthesia and am contemplating divorce due to husbands repetitive habits. My question is..do I start the divorce now and risk financial hardship while in school or wait until graduate in one year with a salary of $150,000? thanks so much
  • Is Arizona a common-law marriage state? If two seniors have been living together for more than ten years without being married and one passes away, will the living senior be responsible for the debts of the deceased.
  • I married a 16-Year Old female (I was 23) last year legally with proper parental consent. I was curious to know what my guardianship/consent rights are when it comes to my spouse being served legal paperwork or court orders by anyone, including myself. She was not emmancipated before our marriage, and I've had to legally be there to sign on her behalf for reasons such as school signup and notarizing items, so I know that I have some consent.
  • Is withholding sex to a husband and to deny to have sex again as long as we are married, grounds for a divorce in Arizona.
  • How is spousal support(alimony)figured?
  • I have recently moved back to arizona,my husband resides in illinois and has filed for divorce. I was told i can't file any papers here to respond to what i was served, and i have no idea what to do or what is going on. Can someone please help me

STORIES

  • Age discrimination in the workplace. . .
  • He told me that I could actually get all the money I needed by using my home as collateral. . .
  • He told me that I could actually get all the money I needed by using my home as collateral. . .

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