When a client first comes into my office to discuss divorce, besides the reasons for seeking a divorce and the residence of the client, there are two other points of discussion – children and property. Setting aside the significant area of the children of the marriage, property is also a significant area to the client. The client sometimes misunderstands and provides incomplete information to the attorney. Beyond real estate and stock and mutual fund portfolios, the client and the spouse have interests in a variety of personal (or non-real estate) properties. An uncommon but significant interest frequently overlooked is the interest the parties may have in a personal injury settlement or judgment in favor of one or both of the spouses. In the nine community property states some of that personal injury settlement or judgment may be community and jointly owned by both spouses. Some of the personal injury funds, however, may be the sole property of one spouse, the one who suffered the injury.
The community or marital interests in the settlement or judicial award of money in personal injury actions are usually going to be the repayment of lost wages arising out of inability to work for a time, the money necessary to pay medical bills for treatment and the physical therapy and/or rehabilitation costs. If the personal injury arose out of an automobile accident, payment to compensate for the damage or loss of the parties’ motor vehicle is likely also to be community property. Naturally, there may be other property losses in a personal injury action, but motor vehicle accidents are probably the most common.
The party who was injured, however, has also suffered physical discomfort, pain and suffering and has been emotionally impacted by the injury. This portion of the personal injury settlement or judgment should be the separate property of the injured party, and should not be subject to claim by the other party, who was not injured. In the course of handling a personal injury action, sometimes there is an offer of settlement or in the case of lawsuit being filed, a judgment in a specific dollar amount. To protect the separate rights of the injured party in such a personal injury award, the amount of the settlement or award should be broken down into areas that are the subject of the compensation – in other words – spell out what part of the settlement or judgment award is for lost income, medical bills and related expenses of treatment and recovery, the property award for the repair or replacement of damaged property and the portion of the award that compensates the injured person for his or her physical pain, suffering and emotional distress. Without this breakdown, in a subsequent divorce action, should one occur, the lump sum or payments made may be treated as belonging in equal portions to both partners in the marriage, which may result in an unfair treatment of the parties. Both the client and a Dallas divorce planning lawyer need to plan ahead.
Thanks to our friends and contributors from The Law Offices of Mary Ann Beaty, P.C. for their insight into divorce practice.