One of the most contentious aspects of divorces is usually division of assets. Texas is a community property state, which means that in general most assets acquired during the marriage are owned by both spouses regardless of who made the money. However, inheritance and gifts received by one spouse during the marriage are separate property, unless co-mingled with marital assets.
Are personal injury settlements separate property like gifts and inheritances? As with many things in the law, it depends. If the personal injury proceeds are for purely pain and suffering, then those funds are treated as the separate property of the injured spouse. However, if the settlement also includes compensation for lost wages or injury to other marital assets, then this portion of the settlement is typically owned by both spouses. As with gifts and inheritances, if pain and suffering settlement funds are co-mingled with martial assets this can cause them to be treated as marital property. The manner in which the settlement is structured can also have bearing on the way that the settlement funds are treated in the event of a divorce.
To maintain the separate property character of settlement proceeds, the recovering spouse can take a few steps to ensure that the settlement is not co-mingled with marital property such as depositing into a separate bank account owned only by the recovering spouse. Be sure to not fund joint obligations (with the settlement proceeds such as a jointly owned car or mortgage.
It is important to hire a competent personal injury attorney well versed in the nuances so that the settlement and the funds therefrom can be handled in a way that retains their separate property nature.