One of the most contentious divorce issues is the division of property. Recently on our divorce forum a user asked, “If I was injured in a severe car accident and I received a personal injury award will the money I was paid be considered separate or community property under Texas Divorce law?”
Marital property can be classified as separate property or community property. State laws, however, will determine how property will be divided by the courts during a divorce.
For example, if you live in Texas and you are getting a divorce, there is a presumption that all property acquired during marriage is community property, although there are some very specific exceptions to this general rule.
Personal injury award and distribution during divorce
So let’s address the issue at hand. Although a personal injury award paid to satisfy a personal injury judgment can be considered separate property, community property, or both community and separate property, Texas family Code generally considers a personal injury award to be community property.
Does this means that you will have to divide personal injury award with your spouse? Not necessarily, but it does mean that you will have to provide clear evidence that the personal injury award is separate property. Payments that the courts have accepted as separate property include compensation for physical pain and suffering, disfigurement, mental anguish, and loss of consortium.
Texas courts have consistently upheld the assumption that other types settlements awarded after a personal injury were NOT separate property. These damages include medical expenses and loss of earning capacity which occurred during the marriage, other expenses incurred to the community estate, and work comp payments or disability payments which were needed to compensate for lost earnings.
Lump sum personal injury award payments for personal injuries
To complicate matters it’s not uncommon for personal injury awards to be paid in one lump sum payment without the differentiation of damages. What does the court decide in this case? The court generally would determine that the lump sum payment is community property, even if there is some separate property damages included in the lump sum payout.
To avoid this issue legal experts suggest having your personal injury lawyer work to structure your personal injury award where the compensation is clearly segregated, but many spouses would not have the forethought to do this unless they were already having marital issues and considering divorce at the time of their injury.
Benefits of Community Property State
Community property laws allow property to be left to a surviving spouse without the property having to go through probate. This process eliminates the long legal process to decide the sole beneficiary of property. Currently California, New Mexico, Arizona, Nevada, Texas, Idaho, Louisiana, Washington, and Wisconsin are community property states.
Community property laws may, however, make it more difficult for some spouses to get property or assets that they consider their property. For example, personal injuries can happen to one person and that person may feel like they suffered the pain and injury and they should get all of the compensation, especially after the divorce.
Talk to a divorce lawyer if you have questions about your personal injury award and whether you will take the money with you after your divorce.
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