Regardless of how long you and your spouse have been married, chances are that you’ve acquired property, shared income from employment, and accrued debt, and you’ll need to decide how to split everything before the judge finalizes your divorce.
Property Division Basics
One of the most contentious aspects of divorce is how to divide marital property and debts. Every state has different property division laws, but most states follow one of two property division models: community property distribution or equitable property distribution.
Community property states, like California and Texas, categorize any asset acquired by either spouse during the marriage to be marital property, which is then divided equally between the spouses in a divorce.
If you live in a state that practices equitable distribution, anything you and your spouse purchased during the marriage may be marital property, but instead of splitting the assets 50/50, the court will divide it “equitably” or “fairly” between the spouses.
Marital Property Versus Separate Property
The process the court uses to divide property is generally straightforward. However, deciding what property is marital and what the court should award to the original owner becomes more daunting. Typically, if a spouse brought the property to the marriage and kept it separate throughout the relationship, the court will give the original owner the property in the divorce. However, if the spouse commingled (combined) separate property with marital property, the judge will categorize it as marital property and split it according to the state’s property division laws.
For example, if your grandmother left you a $50,000 inheritance before you and your spouse got married, and you kept it in a separate account with only your name, the court will consider the money to be your separate property. However, if you put the funds into a joint bank account and used it to improve your marital home, the judge will probably treat the funds as marital property.
What Is Workers’ Compensation?
Workers’ compensation is a state-funded program that requires employers to provide benefits to employees who suffer on-the-job injuries or illnesses. The federal government also has a separate workers’ compensation program for federal employees. If an employee gets hurt or sick on the job, the victim can file a request for workers’ compensation to cover lost wages (current and future), medical expenses, and even a permanent disability.
The agency usually pays workers’ compensation in weekly installments, but it’s also common for the injured spouse to receive a lump-sum payment.
How Will the Court Divide Workers’ Compensation Benefits During a Divorce?
The process the court follows to divide workers’ compensation benefits will depend on what the benefit is supposed to replace. If the award is meant to replace an injured spouse’s income, or cover medical expenses that would have occurred during the marriage, it’s marital property. However, if the award covers an injured spouse’s future lost wages, disability, or medical expenses, the court will most likely treat the income as separate property.
If you have a question about how the court will categorize your workers’ compensation benefit, you should contact an experienced attorney in your state. It’s important to understand that if it’s not clear what the benefits are supposed to cover (i.e., future or current needs), the injured spouse must demonstrate why the court should treat the benefits as separate rather than marital property.
For example, if you receive a workers’ compensation benefit of $20,000, and you believe the court should treat it as separate property and award it to you in the divorce, you will need to convince the judge that the entire benefit is supposed to cover your future medical expenses and lost wages. If you can’t meet this burden of proof, the judge may categorize the full award as marital property and divide it according to your state property division laws.
Commingling Workers’ Compensation Benefits and Marital Funds
Like most separate property, if you combine your benefits with marital property, the court may designate the entire amount as marital property. For example, if you receive a workers’ compensation benefit of $50,000 and you deposit the funds into a marital bank account, the judge will probably divide the entire bank account according to your state’s property division rules, unless you can prove to a certainty which assets are separate and which are marital. This is often impossible once you've comingled funds. If you want to protect your award from property division, be sure to keep the funds in a separate bank account and don’t use it for marital purposes.