Can a personal injury award become part of marital property?

When you enter a divorce proceeding, you might wonder how the court might handle the settlement or judgment that you or your spouse won in a personal injury case. While marital property is equitably divided between spouses in a divorce case, can a personal injury award become part of a couple’s marital estate? 

What is Marital Property?

In New Jersey, marital property is considered any real and personal property that was legally or beneficially acquired by either spouse during the marriage. This includes property that is titled solely in the name of only one of the spouses. However, gifts (except gifts given from one spouse to the other) and inheritances are excluded from marital property.

What is Separate Property?

In an equitable distribution in divorce, the court will designate any property that was owned and acquired by a spouse prior to the marriage to be separate property. In addition, any assets that are acquired during the marriage using separate property such as gifts or inheritance will be considered separate property. 

But under New Jersey law, separate property can become marital property if it is commingled with marital property. For example, one spouse may use a gift or inheritance from their parents to fund a down payment on a piece of real estate. If both spouses then contribute to the expenses for the property, including mortgage payments, property taxes, and upkeep, then the spouse’s separate property from their inheritance may be converted into marital property. In divorce, a spouse may only be able to retrieve their separate property from an asset that both spouses contributed to if the separate property can be properly accounted for. 

Can Personal Injury Award Be Considered Marital Property? 

In addition to assets such as gifts and inheritances, personal injury awards are typically considered separate property (except for the portion of an award that provides compensation for a spouse’s loss of consortium). This is because a personal injury claim is considered a right or an asset that belongs only to the spouse who suffered the injury. 

However, as with other kinds of separate property, a personal injury award can become marital property if the compensation from the award is subsequently commingled with marital assets, such as by being used to pay for the regular expenses of the marital or family household. 

If a spouse wants to keep their personal injury award separate and excluded from equitable division, particularly if they are concerned about the potential of divorce, then the spouse may have the option to put the funds from a personal injury award in a separate bank account or a special trust. But if the parties’ relationship has already deteriorated to the point where divorce is a serious possibility, then options to keep a personal injury award separate may become limited. When there is a real threat of divorce, it may be necessary to thoroughly document the establishment of a trust or other financial transactions involving a personal injury award, so that the court does not later find that the spouse who won the award was attempting to hide assets from equitable distribution.

Contact a Clark Family Law Attorney for a Consultation About Your Divorce in New Jersey Today

If you are thinking about filing for divorce, or if you have already started the divorce process and are dealing with another matter such as child custody, child support, or division of assets, you need to speak with a qualified attorney. The New Jersey family law attorneys at Team Law represent clients throughout the state, including Camden, Passaic, Union City, and Bayonne. We understand how challenging this time can be for you, which is why we will fight hard to protect your interests, and the interests of your loved ones, throughout the legal process. Call us at (732) 540-1394 or fill out our confidential contact form to schedule a consultation. We have an office conveniently located at 136 Central Ave., Clark, NJ 07066, as well as offices located in West New York, Perth Amboy, Edison, Summit, Newark, New Brunswick, Orange, Plainfield, and Jersey City.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you are seeking legal advice, please contact our law firm directly.