If a party receives a personal injury settlement or a wrongful claim settlement after the filing of the Petition for Dissolution of Marriage, the settlement funds are generally not considered marital assets and are considered non-marital assets to the Party receiving the funds.
However, if a portion of the funds were awarded due to past lost wages or loss of earning capacity, that is usually considered a marital asset, thus subject to equitable distribution.
Although the settlement funds are generally a non-marital asset, they can be transformed to a marital asset by comingling the funds with other marital assets (e.g. marital bank account, down payment on a house, etc). The Party claiming that these funds are non-marital has the burden in court of proving these funds have maintained their non-marital status. To ensure your funds are protected and maintain their non-marital status, please contact an experienced family law attorney.
An appellate court recently decided that settlement proceeds from a wrongful termination suit were marital assets in an action for dissolution of marriage, where the Parties’ discussions of their plans for the funds, their conduct regarding the funds during the marriage, and the deposit of the funds into a joint account from which funds were expended for marital debts and purchases created a presumption that husband intended a gift to wife of a half-interest in the funds.
Having both Parties’ names on the bank account which holds the settlement proceeds is not determinative of whether the funds are non-marital or marital. The Party’s decision to use some of the non-marital funds to benefit the family does not transform the funds to marital assets. The amount that the other Party withdraws for his/her use, however, will lose their non-marital character. If marital funds were deposited into the same account that held the settlement funds, this would be further evidence of comingling, making it much more difficult to argue that the settlement proceeds are still non-marital.