How Are Personal Injury Settlements Divided in a Divorce?

When someone else causes another person harm or injury, the at-fault party can be held financially liable for damages. The victim could receive a personal injury settlement that includes reimbursement for their economic damages. The personal injury settlement could also include compensation for non-economic damages.

If a party is single, the settlement amount is that person’s property. However, what happens to a personal injury settlement in California or Nevada during a divorce?

California and Nevada Are Community Property States

Most states divide property in a divorce according to an equitable division between spouses. “Equitable” does not always mean equal. For example, a judge could decide that equitable is a 70/30 split or a 60/40 split.

However, California and Nevada are community property states. In a community property state, the spouses divide all marital assets equally during a divorce. Marital assets typically include all income and property acquired during the marriage.

Separate property refers to assets owned before the marriage. Additionally, inheritance and gifts received during the marriage are considered separate property. The spouse would need to commingle or convert the property to marital assets to be included as community property. 

When a spouse receives a personal injury settlement, it could be considered separate or marital property. It depends on several factors.

California’s Divorce Laws Related to Personal Injury Settlements 

In California, a personal injury settlement is separate property. California Family Code §781 states the settlement is not subject to property division. On the other hand, California Family Code §780 and California Family Code §2603 discuss personal injury settlements as community property. 

The laws seem to contradict each other. However, when you analyze the statutes, you find that personal injury settlements are separate property if:

• The injury occurred after the parents were legally separated or divorced
• A spouse causes injury to the other spouse
• The spouses were not living together when the injury occurred
• The injury occurred before the marriage

A non-injured spouse could claim a portion of the personal injury settlement. They could receive reimbursement for medical bills and other expenses they paid. 

A judge determines how to divide the settlement proceeds when personal injury settlements are community property. The judge considers each spouse’s economic condition and needs when determining how to split the proceeds. However, the maximum amount a non-injured spouse can receive is 50% of the personal injury settlement. 

In some cases, an ex-spouse could receive a portion of an ex’s personal injury settlement. However, the accident or injury would have had to occur before the parties were divorced, and the judge must determine the proceeds are community property.

Nevada’s Divorce Laws Related to Personal Injury Settlements 

Nevada also has laws that address personal injury settlements. Nevada Revised Statute §123.130 states personal injury settlements received before marriage are separate property. The settlement proceeds remain separate property unless converted to community property. 

A personal injury settlement received during the marriage could be community property. If only one spouse receives the settlement during the marriage, it is considered separate property. 

However, Nevada Revised Statute §123.121 refers to situations when the spouses file a joint action. The division of the settlement proceeds depends on how the money is classified in the settlement agreement.

For example, pain and suffering damages are paid to the person who sustained the injuries. Damages for loss of consortium are paid to the non-injured spouse. Settlement proceeds reimbursing the parties for medical bills and expenses are considered community property. 

Nevada law does not explicitly mention lost wages. However, a judge would likely consider a personal injury settlement for lost wages community property because income during a marriage is community property. 

Seek Legal Advice To Protect Your Rights and Best Interests 

The laws governing personal injury settlements during a divorce can be confusing and complicated. In addition, other factors could impact the outcome in your case. 

The best way to protect your right to a personal injury settlement during a divorce is to seek legal advice. Consulting a personal injury lawyer can help you keep a settlement award that should be your money.