What Happens To Your Personal Injury Settlement If You Get Divorced?

Divorce is a complex legal process that impacts nearly every aspect of a person’s life, including their finances, property, and even ongoing legal matters such as personal injury claims. If you are in the middle of a personal injury case and either you or your spouse files for divorce, it can significantly affect the outcome of your claim, the distribution of any settlement or award, and the rights of each spouse. Understanding how personal injury settlements are treated in divorce proceedings is crucial to ensuring you receive a fair resolution.

Understanding Personal Injury Settlements in Divorce Cases

In most states, including Illinois, personal injury settlements can be considered marital or separate property, depending on when and how the damages are awarded. Courts generally categorize personal injury compensation into two primary types:

Compensation for Pain and Suffering, Disability, or Emotional Distress – Typically considered the separate property of the injured party.
Compensation for Lost Wages or Medical Bills Paid by Marital Funds – May be classified as marital property subject to division in divorce proceedings.

The classification of a personal injury settlement as marital or separate property significantly affects how it is divided between spouses in a divorce.

Marital vs. Separate Property in Illinois

Illinois follows the principle of equitable distribution, meaning that property acquired during the marriage is typically divided fairly, though not necessarily equally. Under Illinois law (750 ILCS 5/503), whether a personal injury settlement is considered marital property depends on the nature of the damages and the timeline of the claim.

If the injury occurred before the marriage – The settlement is usually separate property.
If the injury occurred during the marriage – The settlement may be considered marital property, especially if it includes damages for lost wages or medical bills paid from joint funds.
If the settlement is received after the divorce is finalized – The classification depends on when the injury occurred and whether the claim was active during the marriage.

Statistics on Divorce and Personal Injury Settlements

According to the American Academy of Matrimonial Lawyers (AAML), 43% of divorce cases involve disputes over personal injury settlements or awards.
A study from the National Center for Family & Marriage Research found that financial disputes, including settlements from legal cases, are a leading cause of divorce in approximately 22% of cases.
The Bureau of Labor Statistics reports that roughly 35% of personal injury victims lose time from work, making lost wages a significant factor in financial disputes during divorce proceedings.

Factors That Impact the Division of a Personal Injury Settlement

Several factors influence whether a personal injury settlement is subject to division in a divorce:

1. Timing of the Injury and Settlement

The most critical factor in determining whether a settlement is marital property is when the injury occurred and when compensation was received. If an injury occurred before the marriage but the settlement was awarded during the marriage, courts may analyze whether marital funds contributed to legal fees or medical expenses.

2. Purpose of the Compensation

The type of damages awarded can determine how the settlement is divided:

Pain and suffering – Generally remains separate property.
Lost wages – May be marital property if wages would have contributed to household income.
Medical expenses – If paid from marital funds, reimbursement might be considered marital property.

3. Whether Funds Were Commingled

If a settlement or award is deposited into a joint bank account or used to pay for marital expenses, it may lose its designation as separate property. Courts may rule that commingled funds have become marital property and are subject to division.

4. Structured Settlements vs. Lump Sum Payments

A structured settlement provides periodic payments over time, whereas a lump sum payment is given all at once. In divorce cases, structured settlements received after separation may be viewed as separate property, while lump sums received during the marriage could be divided.

Personal Injury Settlements and their Impact on Spousal Support and Child Support

Divorce settlements also take into account spousal and child support obligations. A personal injury award can influence these calculations:

Spousal support (alimony) – If an injured party receives substantial compensation, courts may reduce or eliminate spousal support obligations.
Child support – If a settlement includes lost wages or replaces income, courts may use it to calculate child support payments.

Illinois follows statutory guidelines for spousal and child support but allows for judges to have discretion when large personal injury settlements are involved.

Case Example: Illinois Divorce and Personal Injury Settlement

Consider a case where an individual receives a $500,000 personal injury settlement during the marriage. The breakdown is as follows:

$250,000 for pain and suffering
$150,000 for lost wages
$100,000 for medical expenses reimbursed by joint funds

In a divorce, the court may rule that the $250,000 for pain and suffering remains separate property, while the $150,000 lost wages and $100,000 medical expenses are marital property subject to division.

Steps to Protect Your Personal Injury Settlement in a Divorce

Keep Settlement Funds Separate – Deposit settlement money into a separate account and avoid using it for joint expenses.
Document Expenses – Maintain records showing how funds are allocated, especially for medical bills and lost wages.
Consider a Prenuptial or Postnuptial Agreement – A legal agreement specifying how personal injury settlements will be handled in a divorce can prevent disputes.
Consult with a Divorce Attorney and a Personal Injury Attorney – Work with lawyers experienced in personal injury and divorce law to ensure your settlement is fairly classified and protected.

Contact the Acclaimed Illinois Personal Injury Lawyers at John J. Malm & Associates

Divorce can have a significant impact on personal injury settlements, affecting how compensation is classified, divided, and used in calculating support obligations. Understanding Illinois divorce and personal injury laws can help you protect your settlement and ensure a fair resolution.

If you are facing a divorce and have an ongoing or settled personal injury claim, consulting with a knowledgeable accident attorney can help you navigate the legal complexities and protect your financial interests. Contact John J. Malm & Associates for a free consultation. Let us help you navigate this complex process with confidence.