Do You Have to Share Your Personal Injury Settlement Money in a Divorce?

In Texas, marital assets are considered community property and subject to 50-50 division if a couple divorces. That includes income and most assets earned or acquired by spouses individually during the marriage. Gifts and inheritances received by one spouse are a common exception, as long as they haven’t been commingled with marital assets. So are those specified as separate property in a prenuptial or postnuptial agreement.

What about personal injury settlements? These can involve a substantial amount of compensation for people involved in serious car crashes caused by other drivers, those who were victims of defective products or people who suffered any number of injuries or harm caused by a person, business or other entity. Do you have to share this money (or whatever is left of it) with your spouse if you divorce? It depends on several factors.

What factors determine whether the money is community property?

First, it depends on what the compensation was for. If you were in a car crash, for example, some of the settlement was likely for vehicle damage, medical bills and lost wages. That portion would probably be considered community property to be divided. If part of the settlement was for pain and suffering, that portion would be considered separate property – unless the money’s been commingled.

If you deposited the money in a joint bank or investment account, you commingled the funds and they became a martial asset. Maybe you used the “pain and suffering” portion of the settlement of the money to pay off your mortgage or buy your first house. Again, those would be commingled funds.

If you haven’t yet received the money from a personal injury settlement or award when the divorce process begins, it’s best to talk it over with your family law attorney so that they can advise you about how to handle the money – such as depositing it in a separate bank account in your name only. If it’s money that you already received, your attorney can provide guidance about how it may be divided if a judge makes that determination. As with many aspects of divorce, you and your spouse may come out ahead if you and your attorneys can negotiate a division on your own.