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Are Personal Injury Settlements Marital Assets?
Generally speaking, the answer is no. Settlements from personal injuries are the separate property of the injured person. A portion of an award, if itemized to cover lost wages, or if awarded for loss of consortium, may be considered as a marital asset. Rarely is a settlement itemized, breaking down how the total was derived. See Mazzorana v. Mazzorana, 703 So. 2d 1187, 1189 (Fla. 3d DCA 1997).
When a personal injury settlement is commingled with other funds which are marital, or which are placed into a joint account, the situation becomes much more challenging for a trial judge. This was the very situation which presented itself in the case of Valentine v. Van Sickle, 35 Fla. L. Weekly D1663a, 2d DCA 2010.
In the Valentine case, when the husband was out of town, the wife created a new joint account and deposited the personal injury settlement check into the joint account. A portion of the funds were used to pay marital debts. At some point down the road, the wife transferred all of the money into a bank account in her own name.
The trial judge apparently felt that because the award was deposited into a joint account, and were utilized, at least in part to pay marital debt, that the funds became a marital asset.
The appellate court, upon further review, determined that the trial court had applied an incorrect legal standard when deciding if the award was marital or not. The fact that funds are deposited into a joint account does not necessarily convert separate property into a marital asset. The court needs to “dig a bit deeper” and find out exactly why the funds were placed into a joint account. If the other party’s name was on the account, the funds may have been placed in the particular account for convenience only, and the funds would not lose their separate character. Grieco v. Grieco, 917 So. 2d 1052 (Fla. 2d DCA 2006.
Extreme caution must be exercised when one receives funds which could be considered as separate property, and they become commingled. There is a high risk of those funds losing their separate character, so exercise caution.