Are Personal Injury Settlements Marital or Separate Property in a New Jersey Divorce?

The division of assets and debts ranks high atop the list when it comes to the most recognizable aspects of divorce. In New Jersey, property division adheres to what it known as “equitable distribution.” This means property – classified as either marital or separate property – will need to be analyzed and valued in order for it to be distributed between both spouses in a manner that is equitable and just, not necessarily equal.

Determining which assets will be divided in your divorce depends on how they’re classified, a process that can become an more complex matter when your assets include funds you received from a settlement in a personal injury case. Protecting your rights and interests and tackling the challenges created by this situation is a matter which calls for the support and legal counsel of experienced divorce lawyers like those at Moskowitz Law Group, LLC.

Marital or Separate Property?

Before we discuss how personal injury settlements are handled in divorce, it is important to understand what marital and separate property are:

• Marital property – Assets and debts are defined as marital property when they were acquired by either spouse during the time they were married. Marital property is subject to equitable distribution in divorce.
• Separate property – Separate property is that which is purchases and owned by one spouse before a marriage, or anything they received through an inheritance of as a gift. Separate property is not subject to division in divorce.

Spouses who raise claims that a certain asset in their divorce shouldn’t be subject to division will have the burden of proving why it should be classified as separate property. While that may seem like a simple enough matter based on how New Jersey law defines marital and separate property, complex assets like personal injury settlements can make it much more challenging.

The Facts of Your Case Matter

Every case is different, and the facts surrounding your marriage, divorce, and personal injury settlement have a lot to do with how property division matters will be resolved. Generally, there are a few key points which should be considered:

• What the settlement is for – Victims in personal injury settlements are compensated for various types of damages. In New Jersey, damages for things like lost income and medical expenses (when they’re paid using marital funds) are usually classified as divisible marital property. Damages for damages like pain and suffering or disabilities, however, are usually treated as separate property not subject to division. This means personal injury settlement doesn’t have to be entirely marital property or separate property, and that there may be a marital property share of the total settlement assigned to each spouse.
• Property damage – Depending on the type of personal injury case, personal injury settlements may also include compensation for damaged property, such as a totaled vehicle in a car accident. If that vehicle was purchased during the marriage, compensation for property damage will be marital property. Conversely, if the vehicle was bought by one spouse before the marriage, it will be considered separate property and theirs to keep in divorce.
• How you use the settlement – How you use a personal injury settlement is also an important factor in determining its fate in divorce. If, for example, you deposit settlement funds (even if it would entirely or in part be considered separate property) into a joint account shared with your spouse, or comingle those funds with marital property in some way, it will likely be viewed as marital property.

Looking at how personal injury settlements are handled in divorce is a clear example of the many nuances and potential challenges that can arise when working out property division settlement. As divorce and family law attorneys with more than 50 years of combined experience, our team at Moskowitz Law Group, LLC has the insight and resources you need to navigate those challenges and protect your interests when it matters most.

To discuss your own divorce case and questions with a member of our team, contact us for a free case evaluation. Moskowitz Law Group, LLC is available 24/7 to help.