Determining the Distribution of a Personal Injury Settlement in Your New Jersey Divorce Case

Distributing Funds from Personal Injury Settlement During a Divorce Can Turn into a Complex Endeavor Because of the Various That Factors that Influence the Process.

Determining the Distribution of a Personal Injury Settlement in Your New Jersey Divorce CaseGetting a divorce can be an exhausting, stressful process, especially when dealing with finances.  Because New Jersey divides the assets using equitable distribution rather than a flat 50-50 rate, separate and marital assets must be determined before anything can be allotted to the spouses.  When it comes to splitting a personal injury settlement, the court must first determine whether the total amount is a marital asset, a separate asset, or a combination of both before a division of the settlement can be undertaken.

Parameters for Deciding What Happens to a Personal Injury Settlement in a New Jersey Divorce

When deciding the assets each spouse is entitled to, all property must be identified as separate or marital.  Separate property can include real estate, cars, jewelry, businesses, savings, etc., purchased before the nuptials and kept in one person’s name.  But the instant any of those assets are sold or used to benefit the marriage, they become marital assets.  That is called commingling, which refers to using separate financial resources for marital expenditures.

Deciding if a personal injury settlement is marital or separate property is quite the sticky wicket.  It depends on several factors in an infinite series of combinations, which is a fancy way to say it requires a great lawyer. Practically everything accumulated during a marriage is considered marital property.  Joint bank accounts, property, and assets such as artwork are typically matrimonial assets.  Even when an asset such as a vehicle is in one person’s name, if the other person uses it and is paid for from family funds, it is a shared asset.

Personal injury settlements are mostly seen as individual assets, which set the compensation toward the injured party rather than the relationship. Still, there are exceptions, especially in medical expenses and lost wages, as these branches affect the household as one entity.

Determining the Type of Property Before Determining the Fate of a Personal Injury Settlement

The settlement can be considered marital property, separate property, or a combination of both in varying degrees based on the circumstances.  The factors at play were when you were injured/compensated, what you were compensated for, and where you put the money. Timing has a lot to do with determining where the money will go.  Anything acquired as a prenuptial asset or received after the divorce is finalized will most likely be considered separate.

The aspects of the compensation itself can also determine whether the settlement is separate or marital.  Suppose you receive an award for lost wages, medical bills, punitive damages, and property damage, as those are areas related to the spouses.  Pain, suffering, consortium loss, and future wages are frequently viewed as separate assets because they are directly related to the individual’s well-being.  If payment for property damage (a car) is a part of the settlement, the distribution of those funds will depend on whether one spouse or both own the vehicle.  For the assets to be considered separate, one spouse will have made the payments, have the insurance and title in their name, and use the vehicle exclusively (or most of the time.)

Lastly, where you put the money you receive can also determine whether it is a separate or marital asset.  It becomes marital property if it goes directly into a joint checking account.  It is no longer personal property if you use it to buy a family car or a timeshare in Tahiti.  The aspects of the settlement that affect you directly can be seen as separate, while those that affect the household can be viewed as marital.  It is impossible to predict the court’s decision with absolute certainty, but these standards are typically seen in the New Jersey Court.

Division of a Personal Injury Award in Divorce: A Look at a Practical Example

Let’s take this as an example: Bernard was T-boned by a teenager texting and driving while under the influence of alcohol with a revoked license in an unregistered jeep.  The accident and subsequent settlement occurred 18 months before Bernard and Bonnie were married.  The settlement proceeds belong exclusively to him unless and until he uses the money for household benefits such as mortgage payments, utility bills, and other expenses or deposits the cash in a joint account.

If the settlement were to have taken place after the marriage, and some of the funds were used to benefit the household, a portion of the payment would be considered marital property.  The damages in a personal injury settlement are intended to make the injured party as whole as possible and, thusly, are usually considered the personal property of the injured party.  These damages are pain and suffering, emotional distress, and loss of consortium, and they are generally not part of the equitable distribution of assets in the divorce.

Additional Factors When Determining the Effects of Personal Injury Damages on Your Divorce

If the settlement were for property damage, the owner(s) of the property would receive that portion of the settlement.  Going back to Bernard, if his car were exclusively his, meaning it was insured only in his name and the car payments were made using an account not shared with the household, he would be entitled to the property damages allotted. The settlement given for lost earnings or other economic injury, medical expenses, and future damages, as they are used to support the household financially, is likely marital assets.

Determining Marital or Separate Property to Handle Personal Injury Settlement in a NJ Divorce

The most important fact to remember is that much of what is determined to be separate or marital property requires a judge to carefully study the circumstances surrounding the settlement and the spouses’ legal standing when the settlement is paid.  This is called the “analytical approach.”

New Jersey uses an analytical approach to dividing personal injury awards in terms of divorce.  They can give each spouse a portion of the prize based on the damages paid.  Damages for disfigurement, pain and suffering, emotional distress, and loss of potential future income are usually considered separate property.  Loss of consortium is typically paid to each spouse. Medical expense compensation, lost income, and property loss are frequently treated as marital assets, but there is no hard and fast rule as to how much each spouse is given, hence the analysis by the court. An example would be the loss of future income.  Suppose the accident occurred hard upon the filing for divorce. In that case, a judge may find that a lesser percentage of future income damages would be paid to the uninjured spouse because they would no longer be a part of the household.

What Prior Case Law Illustrates about Division of Personal Injury Settlements in NJ Divorces

In the case of Rosemarie R. v. Manuel R., a dispute over whether or not a personal injury settlement was the exclusive property of one spouse was brought before the court, and its result demonstrates the importance of defining separate and marital property when discussing personal injury awards.

Rosemarie and Manuel, after almost 20 years of marriage, are getting divorced.  During the marriage, Manuel received a $31,000 personal injury settlement. He used a part of the settlement to make some repairs on the house and to get them caught up on several bills.  Manuel claimed that the rest of the settlement belonged to him because he was the person who was injured.

However, the judge disagreed because Manuel had used a portion of the settlement for marital expenses, so it was a shared asset.  The monetary award was commingled with the residential finances and was therefore eligible for equitable distribution between the spouses.  This Is a crystal-clear example of how a personal injury settlement can become a marital asset.

Contact Our Family Law Office for Help with a Personal Injury Settlement During a Divorce in New Jersey

If you are contemplating filing a personal injury suit but are afraid your pending divorce will leave you with nothing, let the attorneys at the Montanari Law Group work for you.  Our skilled divorce team will protect your rights and negotiate a fair division of the settlement in Wyckoff, Montclair, Paramus, Wayne, Ridgewood, West Orange, Woodland Park, Clifton, Little Falls, Kearny, Haledon, and throughout Passaic, Essex, and Bergen County, NJ.

There is no doubt that these kinds of proceedings are complex, and you have a lot riding on them both financially and emotionally.  Call us today at (973) 233-4396 or contact us online to schedule a free confidential consultation.  There is a lot at stake.  You can’t afford to do it on your own.


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