Are Damages and Compensation Awards Protected From Divorce Claims?
If you or your husband or wife had the misfortune of being injured resulting in a personal injury claim and an award for pain and suffering, financial loss, or to help you adapt to changed physical circumstances, you may be forgiven for thinking that personal injury compensation is ringfenced and can't be shared in divorce financial settlement proceedings.
In family law proceedings the answer isn’t clear cut as the court could and may take the compensation award into account rather than earmark it for the recipient of the compensation. The family lawyers at OTS Solicitors can help you understand the family court approach and the judicial process when considering personal injury awards in financial settlement claims.
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Compensation awards and divorce
Sustaining an injury and going through personal injury litigation to secure damages is undoubtedly a stressful experience that can in turn lead to marital problems because of the stress of the compensation court proceedings or the financial strains on the family whilst you are waiting for the compensation money to come through. Sadly, those additional pressures can lead to marital breakdowns and divorce proceedings.
Unfortunately, it is too simplistic to say that a compensation award is earmarked for the recipient and can't be touched as part of the divorce financial settlement because it is more complicated than that.
The family court and the treatment of damages and compensation awards
In divorce financial settlement proceedings a family law judge has wide discretion to make a financial court order that is fair to both husband and wife. In exercising that discretion, the judge has to consider a list of statutory factors contained in section 25 of the Matrimonial Causes Act 1975. Prior to considering those factors the court will decide:
- The extent and value of the matrimonial assets
- The extent and value of any non-matrimonial assets
- Whether any disputed assets are matrimonial or non-matrimonial assets
- The extent of the reasonable needs of any children of the family and the husband and wife
- Whether reasonable needs can be met without recourse to non-matrimonial assets
When it comes to exercising court discretion, the court has the power to order the sale of a property owned in the sole name of a husband or wife, even if the property was purchased by the legal owner before the date of the marriage. Likewise, personal injury compensation paid to one spouse can be ordered to be transferred to the other spouse or the other spouse could receive a greater share of all the other family assets because their ex-partner is retaining all the personal injury damages.
Fairness and damages and divorce financial settlement proceedings
Family law solicitors are often told that it would not be fair to share damages in divorce proceedings because the damages were payable to a husband or wife (not jointly) and the basis of the compensation award was to reflect the pain and suffering of the injured person or to help meet their needs for adapted accommodation or specialist equipment.
That argument is true but in difficult cases, where money is tight and needs are great if the injured spouse gets to keep all their damages it may mean their spouse cannot afford to buy a new house for themselves and their children forcing the spouse and the children into private rented, local authority or housing association accommodation.
Damages and non-matrimonial assets
Even if an award of damages is found by a judge to be a non-matrimonial asset the money is still not safe. You may question what the difference is between damages that are ‘matrimonial’ or ‘non-matrimonial’. The difference comes down to whether the damages were shared with the non-injured spouse. Examples of sharing include:
- Putting the compensation money in a joint bank account
- Using the damages to pay off the mortgage on the family home
- Putting the money in tax-efficient investments to use the annual ISA allowance of husband and wife
Assessing reasonable needs to see if damages compensation should be used as part of the divorce financial settlement (even though the compensation is assessed to be a non-matrimonial asset) is always difficult as a judge is often balancing the housing needs of dependent children against the housing needs of a personal injury claimant who was awarded compensation to help them meet the specific needs of their disability, such as the purchase of an adapted bungalow.
How OTS Solicitors can help
OTS Solicitors can help you in a number of different ways, such as:
- Advising on a prenuptial agreement or a postnuptial agreement if one spouse is likely to receive a significant compensation award
- No-fault divorce proceedings advice
- Providing robust pragmatic divorce financial settlement advice
- Offering legal support if you chose family mediation to try to reach a divorce financial settlement
- Converting your financial agreement into a binding financial consent order
- Representing you in contested divorce financial settlement proceedings where there are arguments over whether assets are matrimonial property or not and the extent of reasonable needs
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