Colorado divorces are governed by law, under which the court divides property, including personal injury awards, between the spouses in a way that it considers the fairest.

Legally Speaking: It Depends

Generally, Colorado law not only terminates the legal partnership between two spouses, but can also require that the property previously shared by the couple be divided. One spouse’s property owned before marriage, as well as gifts and inheritances received during the marriage, remain that spouse’s separate property in the event of a divorce.

But Colorado personal injury awards are sometimes treated differently.

How a personal injury award is treated in the event of a divorce depends on whether the money is categorized as a marital or a non-marital asset. Some of the criteria that will need to be examined include:

Analyzing the Nature of the Damages

Sometimes marital property can be distinguished from non-marital property through an analysis of the damages themselves. Your personal injury attorney will likely need to see your settlement papers to determine what type of damages were awarded and how much money was apportioned in each category.

Courts often consider personal injury damages to be “personal” in nature, meaning that they were intended only to compensate the injured spouse and are not divisible. Other damages, such as pain and suffering, emotional distress, and loss of consortium may also be considered personal because they directly affect the injured person.

However, monetary damages for lost wages or medical expenses may be considered joint marital property, since both spouses were affected by the loss of income or increase in expenses and thus deserve to be compensated for their joint losses.

State Divorce Laws

Nine states — Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin — have community property laws related to divorce. Alaska is an opt-in community property state that gives both spouses the ability to make their property community property.

In the community property states, all the assets acquired during the marriage, including a personal injury settlement, are considered marital assets and could be split equally between the parties, although certain exceptions might apply. But even if you live in a community property state, the nature of your personal injury award will ultimately affect how it will be divided.

Most other states, including Florida and Colorado, have equitable distribution laws, which according to a Chicago divorce lawyer will commonly define marital property as all property acquired during the marriage, except property obtained during marriage by gift, bequest, devise, or descent, or property provided for in a written agreement (potentially a personal injury settlement agreement). But an equitable division is not necessarily an equal division, and the court will divide property between the spouses in a way that it considers the fairest. If settlement funds become commingled with marital assets, they are considered marital property.

California (a community property state) and New York (an equitable distribution state) have their own laws concerning personal injury settlements. In California, if an injury occurred during the marriage, the entire personal injury award is considered community property, but in New York, an injured spouse’s personal injury award is treated as separate property and isn’t subject to division.

The Timing of the Settlement

Generally, as long as a court verdict or settlement from a lawsuit is reached before a divorce decree is final, the award will be considered a joint marital asset. If settlement occurs after the divorce is final, then the award will typically go to the injured spouse, although the other spouse could still argue that because of the settlement, the injured spouse may be capable of making a lump-sum alimony payment.

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