Today I want to talk to you about lawsuit proceeds in the context of a divorce. Let’s say that you’ve got somebody, whether it’s the husband or wife who was in a car wreck. Let’s say there’s some other kind of action that’s been filed. Some sort of lawsuit that’s been filed in court and the two of you happen to be going through a divorce. One of the things that the court’s going to do is going to look at the type of damages that the person is awarded. Let’s say that a lawsuit takes several years to get done and right in the middle of the lawsuit going on, the parties decided they’re going to part ways.
Then the court’s going to have to figure out what to do with the lawsuit proceeds. Now, what I’m talking about here is what happens in the event that there is not an agreement. Sometimes people can reach an agreement and the court’s probably going to accept it. However, let’s say that there isn’t an agreement. What the court is going to do is they’re going to look at the type of damages that the person has sustained. Some types of damages are going to be considered to be marital property. Other types of damages are not generally going to be considered to be marital property.
Let’s say that you’ve got somebody who gets in a car wreck, or let’s say that there’s some sort of employment related litigation. Let’s say such as wrongful termination. The part of the lawsuit proceeds that are going to be attributed to physical harm, emotional harm, that sort of thing. This is not going to be considered to be marital property. There are other parts of the lawsuit that could be considered. For example, if the person is out of work for an extended period of time. That portion of the lawsuit proceeds is going to be considered to be a part of the marital estate. You really have to distinguish. It’s complicated as to what part of the proceeds for the lawsuit is going to be considered marital or non marital.
Let’s say that the money is to recover something that is going to be considered. That could have been used for disposable income that’s not attributable to pain and suffering and that sort of thing. That’s generally going to be considered clearly to be marital property. Now, it gets really complicated though in the event that there is a settlement versus actually going to trial. If you go to trial and there’s a jury trial, it’s clearly going to be for say pain and suffering, this is for medical bills, this is for lost wages. However, if there’s an actual settlement, it’s going to be characterized in a totally different way. Sometimes these settlements don’t clearly specify what portion of the lawsuit is due to lost wages, what part is due to pain and suffering and so on.
It’s really important that you get somebody to look at all of this. Just remember, it could end up that you might have to come back after the lawsuit is done a couple years later for the court to make a final determination on how those proceeds should be divided. Those are some of the issues that you really have to think about whenever you’re going through a divorce. The short answer as to how lawsuit proceeds are going to be divided and it really depends on the situation.
