Equalization: Personal Injury Awards, Part 1

Do I have to share my personal injury settlement or award with my ex-spouse?

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As discussed in a previous post, upon separation spouses calculate their net family properties, and an equalization payment is usually paid by the spouse with the higher NFP to the spouse with the lower NFP. The goal of this equalization payment is to equalize each spouse's NFP.

When calculating your NFP, the Family Law Act sets out a number of different categories of property that are not to be included in the calculation. One category of excluded property is damages, or a right to damages arising from a personal injury.

If you receive an award for damages for personal injuries, nervous shock, mental distress, or loss of guidance, care and companionship, or part of your award is apportioned to those types of damages, you are entitled to exclude those funds from your net family property calculation. This means that you do not need to share them with your spouse or former spouse.

Learn More: Excluded Property & Tracing

Can I exclude my entire personal injury settlement?

Personal injury settlement awards are generally broken down into different categories, also known as "heads of damages." These include general damages, loss of income, loss of future income, etc. Family law treats each category differently, depending on what the money is designed to compensate you for. Some may have to be shared, while others may not.

For example, if you receive an award under the category "general damages" you will not have to share any of the award with your spouse. This is because "general damages" are aimed at compensating victims for non-economic damages such as pain and suffering or emotional distress. These damages are purely personal in nature, meaning your spouse or former spouse has no right to share in them.

If part of your settlement compensates you for money you would have received during the marriage, such as "loss of past income" it would likely have to be shared.

Keep in mind:

As discussed in our previous post, what you do with the funds you receive can impact whether it is shared in a separation. If you receive an award for "general damages" and invest that money in a joint investment or otherwise use it for the benefit of the family, it is likely that you will no longer be able to exclude it from your NFP calculation.