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Personal Injury Money – Divisible or Not under Wisconsin law?

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A frequently asked question in divorce cases is whether personal injury money is subject to division at the time of the divorce. The answer is “yes” and “no.”

Generally speaking, personal injury money is not a gift or an inheritance, so it is not excluded from the presumption that the award should be equally divided. However, that is not the ending point. The case law goes on to say, that personal injury money is unique and is designed to compensate the injured party and should be treated differently than other marital assets. The non-injured spouse is entitled to receive that portion of the settlement that relates to compensation for lost wages and payment for medical expenses. Otherwise, the majority of the injury settlement is to be allocated to the injured spouse.

The leading case in the state of Wisconsin is Richardson v. Richardson,  139 Wis. 778.  407 N.W. 2d 231 (1987), which is a Wisconsin Supreme Court Case. The court stated the following:

“We hold that a personal injury claim (in this case for medical malpractice) is property subject to division upon divorce under sec. 767.255 (now sec. 767.61). In contrast to the court of appeals, however, we conclude that the nature of a claim for personal injury renders the presumption of equal distribution established in sec. 767.255  (now sec. 767.61) inapplicable. We conclude that in dividing a personal injury claim (before settlement of or judgment on the claim), a circuit court should presume that the injured spouse is entitled to the entire amount recovered for loss of bodily function, future earnings (that is after the date of divorce), and pain and suffering; that the “uninjured” spouse is entitled to the entire amount recovered for loss of consortium; and that the amounts recovered for medical and other expenses and loss of earnings incurred during the marriage are to be distributed equally.” (at page 780.

The court went on to say that:

“compensation for loss of bodily function, for pain and suffering  and for future earnings replaces what was lost due to a personal injury. Just as each spouse is entitled to leave the marriage with his or her body, so the presumption should be that each spouse is entitled to leave the marriage with that which is designed to replace or compensate for a healthy body. We therefore conclude that that statutory presumption of equal distribution should be altered with respect to certain components of a personal injury claim. Instead of presuming equal distribution of a personal injury claim, the court should presume that the injured party is entitled to all of the compensation for pain, suffering, bodily injury and future earnings. With regard to those components of a personal injury claim, such as those that compensate for medical or other expenses and lost earnings incurred during the marriage, the court should presume equal distribution.” at page 786.

Even though a personal injury award under Richardson, is not divided down the middle with the non-injured party being compensated, with the exceptions noted above, personal injury and disability awards can also be considered income for purposes of paying child support and/or spousal support (“maintenance”) with certain limitations. Under DCF 150.02 (13) “Gross income” under sub. 4 is defined as “Net proceeds resulting from worker’s compensation or other personal injury awards intended to replace income.”

A person going through a divorce who has the expectation of receiving a personal injury settlement is entitled to keep 100% of the amount of award designed to compensate them for the injury, whereas the non-injured spouse is entitled to 50% for that portion relating to medical expenses and lost wage compensation, along with their own loss of consortium on a larger case. At  the same time, that portion of the personal injury award designed to compensate for income, is also considered “gross income” under DCF guidelines, which can be used for the payment of child support, and presumably spousal support (“maintenance”).

If you have a received a personal injury settlement or worker’s compensation award and are going through a divorce, call one of the experienced family lawyers at Karp & Iancu, S..C. to have your rights explained to you.

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