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How are Personal Injury Awards Divided in Divorce Settlements?

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Divorce And Personal Injury

We all know that marital property is divided in a divorce. In Colorado, marital property is divided equally between the parties. But what happens when one of the parties is in a personal injury accident? How is the personal injury settlement divided in a divorce? We talked to Kyle Bachus, a Denver personal injury attorney about this precarious legal situation. Here’s what you need to know.

Identifying Separate Property and Marital Property in Divorce

To understand how Colorado law treats personal injury settlements in divorce, it’s important to begin with understanding the difference between separate property and marital property in a divorce. The law calls for the court to divide marital property between the parties. But the laws also state that not all assets held by a party count as marital property. 

Marital property is only property that comes to either party during the marriage. There are a few notable exceptions. Property that a party has before the marriage remains their own separate property as long as it’s not mixed in with the marital property. In a divorce, the court may only divide marital property. The court must look at the facts and decide whether each piece of property is separate or marital.

Colorado law 14-10-113(2) defines marital property. The law says that in general, all property acquired by either spouse after the marriage begins is marital property. The only way newly acquired property will not be designated marital property is if an exception applies. For example, property that either party gets as a gift or as inheritance is their own separate property. Also, the parties can exclude an item of property from marital property by making an agreement. 

Acquired property becomes marital property up until the date of separation. After the date of separation, any property that a party acquires is their own property. If the accident occurs after the date of separation, the personal injury award is non-marital property.

Is a Personal Injury Award Marital Property in Colorado?

Yes, a personal injury award is marital property in Colorado. The law states that everything acquired by a spouse is marital property unless it’s one of the listed exceptions. A personal injury award is not a listed exception. Therefore, Colorado law treats personal injury settlements as marital property.

Colorado Court Cases About Personal Injury Settlements and Divorce

Colorado has multiple court cases that address how personal injury settlements are treated in divorce. One case is In Re Marriage of Field, 779 P.2d 1371 (1989). In the Field case, a personal injury accident occurred on the date of the parties’ separation. At the time of the judgment of divorce, the personal injury case still hadn’t been resolved.

When finding that the personal injury funds were marital property, the court recited Colorado laws defining marital property. They said that because a personal injury settlement is not one of the listed exceptions to marital property, any settlement is marital property. The court instructed the lower court to treat the personal injury funds as marital property and subject to division in divorce.

What Happens When the Personal Injury Case Is Still Pending at the Time of Divorce?

Another issue in the Fields case was the fact that the personal injury case was still pending at the time of the final orders of divorce. The injured spouse argued that the value of the personal injury settlement was speculative. Without being able to place a concrete value on the amount of the award, the injured spouse argued, it would be too speculative of an exercise to possibly award the judgment fairly between the parties.

The court disagreed. They said that other types of awards like pension payments might be speculative at the time of the divorce. The court noted that it was appropriate to award each party a percentage of the eventual award based on principles of equity.

How Are Personal Injury Awards Treated in Divorce Settlements?

With personal injury settlements considered subject to division in divorce, the question becomes how the court goes about dividing the settlement funds. The court seeks to make an equitable division of marital property given all of the circumstances involved in the case. The court does not have to award the settlement funds equally. They only have to make a distribution that’s fair.

Perhaps one of the most significant factors that the court considers is the purpose of the settlement funds. For example, if the settlement funds are meant to pay for medical bills that were paid from marital funds, there’s a good chance that the court is going to weigh the funds equally between the parties. Similarly, if the funds replace lost marital income, the court might consider a relatively equal distribution for the parties. The court can also consider the funds as it fashions spousal support and child support orders.

Funds for pain and suffering may be more likely to be attributed to the injured party. The courts see the injured party as primarily bearing the personal loss of the injury through their suffering. However, the courts also recognize that the non-injured spouse bears some losses like changes in lifestyle and loss of consortium. In the end, the court weighs all of the factors at play and fashions an equitable settlement under the law.

Equitable Division of Personal Injury Settlements in a Colorado Divorce

To ensure that a party receives a fair share of the personal injury settlement, how you structure the settlement is critically important. As the injured party works towards the resolution of the injury case, the labels placed on settlement funds may become relevant in the divorce. If the injury funds are compensation for medical bills and other economic losses, the funds are likely to be considered marital. If they’re for pain and suffering, they may be more likely to be awarded to the injured spouse.

A party to the divorce should be prepared to present the factual evidence surrounding the personal injury case as it’s necessary to assist the divorce court. You may need to present evidence about economic losses, the impact of the injury on the marriage, changes in lifestyle of either party, and any other relevant information to help your case. Carefully presenting the factual evidence and supporting legal arguments helps the court make a favorable and equitable distribution of the personal injury settlement during divorce proceedings.