Is my compensation protected from my divorce proceedings? | Bolt Burdon Kemp Is my compensation protected from my divorce proceedings? | Bolt Burdon Kemp

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Is my compensation protected from my divorce proceedings?

In a personal injury or clinical negligence claim, having suffered potentially life changing injuries, you may want to pursue a compensation claim not only for the harm and suffering you have endured but also to assist with your new needs and to help you adapt to your new way of life.  You would of course expect that every penny received should go directly to you, to help with this important rehabilitation.

However, this is not always the case, especially if you are going through a divorce or divorce proceedings are commenced after your claim has settled.

While it may sound bleak to raise the issue of a divorce, sadly relationship breakdowns are more common in the first few years following a catastrophic injury.  They can be the result of a change in circumstances such as care needs, stress and financial pressures.  There are many debates surrounding the issue of how compensation should be regarded when dividing a couples’ assets during a divorce but unfortunately, there is no definitive answer and the Courts will deal with it on a case by case basis.

Although it is not always the case that the compensation will be considered by the Court, essentially there is no way to ring-fence it or completely protect it from the scrutiny of the Court and you should be prepared for any outcome.

The parties to the divorce or the Court will decide firstly whether the compensation should be included in the divorce as a matrimonial asset and secondly, how to weigh the needs of the partner in receipt of the compensation against their former partner and children, if applicable.

Should the compensation be included?

The starting point for the Court is considering whether the compensation is to be included in the assets available for distribution.  The Court will need to consider the intended purpose of the damages award and this may be significant to determine whether or not it should be included in the general divorce ‘pot’.  They will decide on the facts of each case whether the money should be shared as with other assets or whether some or the whole amount should be withheld by the recipient, based on their needs and the fact that they gained it by way of compensation rather than any other way.  For instance, if the sum awarded was small and specifically for pain and suffering then they may decide this money should not be available for distribution in the divorce settlement.

Alternatively, if a large sum had been awarded and part of it was for the partner’s future loss of earnings then it’s likely the Court would consider this for distribution.  Had the injury or negligence not occurred but the divorce still happened, then their actual future earnings would likely be contemplated by the Court as an asset to be shared.

How should the compensation be distributed?

The Court’s general starting point when deciding how to approach the division of finances is section 25 of the Matrimonial Act 1973 which says that they will have regard to all circumstances of the case before them, the first consideration being given to the welfare of a minor under 18.  They will also consider various other factors;

  • The income, earning capacity, property and other financial resources each of the parties in the marriage have or are likely to have in the foreseeable future
  • The financial needs, obligations and responsibilities which each of the parties to the marriage has or are likely to have in the foreseeable future
  • The standard of living enjoyed by the family before the breakdown of the marriage
  • The age of each party to the marriage and the duration of the marriage
  • Any physical or mental disability of either of the parties to the marriage
  • The contributions which each of the parties has made or is likely to make in the foreseeable future including any contribution by looking after the home or caring for the family
  • The conduct of each of the parties

If the parties to the divorce have children, the Court will pay particular regard to;

  • the financial needs of the child
  • the income, earning capacity (if any), property and other financial resources of the child
  • any physical or mental disability of the child
  • the manner the child was expected to be educated or trained

As you can see from the above criteria, there are a huge range of factors that the Court consider when dividing the assets.  Although it does include a consideration of any disability the partners may have, this is but one thing for the Court to consider against all of the other circumstances.  It may be that the needs of the disabled partner essentially absorb all of the compensation leaving no surplus, in which case the Court might decide that it should not be included in the divorce.

Whilst the Court try to balance the interests of the parties, they place significant emphasis on the needs of the children and especially providing them with a suitable home, which may be to the detriment of the party in receipt of the compensation.  Case law suggests that they are likely ensure the partner living with the children has sufficient capital for a property – even if it means the other partner selling an adapted family home to fund it.

As I confirmed above, there is no way of protecting your compensation with certainty, however there are things that can be done which the Court will take into consideration.  For example, placing your compensation in a discretionary trust, entering into a pre-nuptial agreement and ensuring your award is clearly broken down so the Court can identify what you have received for each head of loss.  I would recommend speaking to your family lawyer about these options.  However, it is also likely to be advantageous to inform the solicitor acting for you in your compensation claim that you are going through a divorce or are likely to in the future so they can help you consider your options or sign-post you to someone that can help.

The Court’s ultimate end goal is to achieve fairness, so although you may not agree that compensation should be included in a divorce, as many do, on the other hand the Court want to ensure your ex-partner and children, if relevant, have stability to continue without any hardship following the divorce.  It is a balance of morals and the Court has a broad discretion as to their application of the criteria and their understanding of the circumstances.  However, this discretion can bring uncertainty and whilst you may have fought long and hard for the settlement you deserve for the trauma suffered, you should be wary that it may be seen by the Court as a lump sum to be distributed in divorce proceedings.

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