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Question:  

Years ago I lost my lower legs and my right hand. The settlement damages were awarded to me for my loss. All of this happened before I was married, and now I'm divorced. 

So is my ex-wife entitled to a settlement made prior to our marriage?

 

Answer:

Property (in the broad sense to include personal injury settlements) acquired prior to the marriage is considered “separate property” in most states. This means it is not automatically a part of the marital estate subject to division in a divorce. 

Personal injury settlements acquired during the marriage, moreover, are generally considered “separate property” because they compensate the injured for a personal loss, as opposed to the marriage partnership for a partnership loss. However, there are (as in most laws) exceptions. 

First, if the settlement is for lost earning capacity rather than a lost limb, then a divorce court may consider it the same as income you brought to the marriage, even if the income stream came from a settlement made prior to the marriage. 

Second, if you comingled the settlement money with marital property (e.g., used some of it to remodel your marital home kitchen), divorce courts are loathe to and usually do not parse-out what you contributed – it is comingled, forever mixed with the marital property. 

Third,  if the other spouse “needs” a share of the separate property because she has taken on a larger share of marital debt, cannot support herself, etc., then the divorce court may divide it. What the court will do in your case depends in large part on the facts unique to your case, such as what you did with the money and how you treated it during your marriage.

Keep in mind that I am a Michigan attorney and cannot give you detailed advice about the laws in Texas. I can only give you general information in this answer. You should not rely on this answer as establishing an attorney-client relationship, and you should contact an attorney in your area immediately if you need additional information or legal representation, as most parties in divorces do. Cordell & Cordell has offices in Dallas and Fort Worth, Texas.

 

Jennifer M. Paine is an Associate Attorney in the Detroit, Michigan office of Cordell & Cordell P.C. She is licensed to practice in Michigan, and has been admitted pro hac vice in Illinois, Ohio, and the United States Court of Federal Claims. Ms. Paine received her BA in English and Mathematics from Albion College and graduated Summa Cum Laude. She received her Juris Doctorate from MSU College of Law and graduated Summa Cum Laude.


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Settlement is separate property - if you protect it
written by Hal Davis, January 26, 2010
Texas is a community property state (from the Spanish tradition) instead of the English tradition, which refers to marital property. What happened to you before the marriage resulted in you receiving monetary compensation before you were married. Money you have before marriage is separate property (not community property). As a general rule, absent fraud, the divorce court can't touch your separate property, but it can keep your separate property in mind when deciding on a just and right division of the community property.

Texas law is settled that your wife gets you as you find you. I don't want to be crude or callous, but your wife can't marry you and then claim she's entitled to compensation because you're not as you might have been.

The tricky thing is keeping your separate property separate. If your separate property gets commingled with community property, it can be very difficult and expensive (perhaps impossible) to establish how much of the commingled mess is still your separate property. This is more subtle than it seems. It's obvious that you've commingled funds if you use your separate property for a down payment on a car and then make the payments from earnings (community property). And, it's obvious that you've commingled funds if you contribute to the separate property from your earnings. What's much less obvious is that earnings on separate property are community property. So, if your separate property is invested in IBM stock, and IBM pays a dividend, suddenly your account contains both separate property and community property. And, if you take money out for any reason, which money comes out: community property first, separate property first, or a proportion?

In most amicable divorces we won't sweat the details. If you've generally kept your separate property separate, we probably won't require forensic accountants to trace every transaction and render an opinion on how much of the account is community property. But you will need to begin negotiations with the understanding that your separate property is not subject to division, provided you can clearly establish what your separate property is.

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