Clients often want to know whether a personal injury settlement is community property in a Texas divorce. Plano Divorce Lawyer Richard Armstrong states “It depends..”
Generally speaking, any property in the marital estate which was not owned prior to the marriage, inherited or received as a gift is presumed to be community property. Like inherited property, personal injury recoveries, including settlements, can be separate property. We say “can be”, because moneys which are earmarked for reimbursement of medical expenses, burial or funeral costs, pain and suffering, mental anguish and the like are all referable to the injured person. Those would be therefore be considered separate property. However, be careful that you don’t overlook money that is lost wages or lost earning capacity earned during the marriage. Earnings are community property, and earnings or earnings capacity, even though part of a personal injury settlement, will be capable of division by the family Court. Often the community property question is avoided because the married Plaintiff in a personal injury action has an incentive to minimize income taxes, and will deliberately cast the settlement agreement, judgment and sometimes pleadings in the lawsuit to avoid mention of lost earnings or earning capacity. If the Plaintiff successfully words the settlement agreement to accomplish this goal, he or she will have also lessened the chances of a divorce classifying the recovery as community property.
The importance of properly documenting the settlement cannot be underestimated, because the burden of proof in Texas family law matter always rests squarely on the Petitioner to prove that property is separate, rather than community in nature. Qualified legal counsel should therefore be consulted during settlement negotiations and drafting, or during drafting of a judgment. Much heartache, whether from a perceived unfair property division or from adverse income tax consequences, can be avoided if counsel is retained earlier rather than later. Armstrong the Law Firm is qualified to represent clients both as personal injury attorneys in trial and settlement negotiations, and as divorce lawyers and family law attorneys at the property settlement stage.
Plano Divorce Lawyer and Family Law Attorney Richard L. Armstrong has practiced in the Plano, Allen, McKinney and Frisco area since 1985, and has been practicing law for 28 years.