Protecting Your Personal Injury Settlement: The Importance of Consulting With a Family Lawyer

Victims of personal injury in Ontario may not realize that their case settlements and financial winnings could be at risk in the event of a divorce. A family law lawyer can help.

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Forum Law and Yegendorf Rashid Injury Lawyers

May 8, 2023 02:00 PM

A personal injury can be a life-altering and devastating experience, leaving victims grappling with the physical, emotional and financial fallout. In Ontario, the law allows personal injury victims to seek compensation for their losses, allowing them to focus on their recovery and rebuilding their lives.

However, many people (or injury victims) don't realize that even after winning a settlement, their future financial stability may still be in jeopardy. That's because personal injury victims who are married or in a common-law relationship could find themselves at risk of losing their hard-won compensation. This happens when their partner seeks a divorce or separation. Unfortunately, such instances are not uncommon.

The Grim Reality of Personal Injury Victims Facing Divorce

Despite what many assume, justice served by the family court system in Ontario does not always offer protection for the compensation award of personal injury victims. Law firms like Forum Law specializing in family law witness this grim reality play out far too often. Even personal injury lawyers like Yegendorf Rashid Injury Lawyers would have few examples in their practice to support this.

While it's true that the damages for personal injury are generally excluded from the property calculation in the event of a marriage breakdown, there are parts of personal injury settlements or awards that do not fall under the family law definition of damages.

For instance, payments intended to replace lost income or future income of the injured spouse may not be exempted from Family Law Act claims. Additionally, disability pensions, which are often a critical source of income for personal injury victims, must be divided on separation.

Even if a payment/settlement intended to replace lost income is not considered property to be divided, it may still be treated as income for the purposes of spousal or child support. This could result in a significant portion of the compensation being paid out as support.

On that note, personal injury victims need to be aware of the potential consequences of commingling their damages payment with joint assets such as a joint account. Once the payment is mixed with marital assets, it is no longer excluded, and the spouse could lose a significant portion of it in the event of separation or divorce. While it may be possible to claim the exclusion by tracing the funds, this can be a challenging process that may not always yield the desired results.

In the wake of a divorce settlement, matrimonial homes can also pose a significant problem for personal injury victims. The full value of all matrimonial home(s) is included in property division calculations. This includes any modifications or renovations made to accommodate an injury/disability—such as ramps, elevators, lowered counters, special bathrooms or other expensive modifications—even if they were paid for with compensation awarded for personal injury damages.

Additionally, suppose the injured person uses their compensation payment to pay the mortgage on the marital home. In that case, their spouse gets the benefit of half of whatever is paid down on the mortgage.

The injured spouse’s plight can very well be compounded if their spouse successfully obtains an order for exclusive possession of the modified home.

Under such circumstances, it is ever-crucial for the injured victims to hire a competent lawyer who can advocate effectively on their behalf. After all, the presiding judge needs to be convinced of the necessity of the modifications for the injured person and their need to remain in the home.

It would almost appear that even an injured/disabled person, in the eyes of the law, deserves less sympathy than a spouse engaging in divorce settlements. To the law, being disabled does not automatically mean that the injured person cannot work.

As such, if an injured person is not currently earning an income but has the ability to work and earn, the court may impute an amount of income to them when determining child or spousal support obligations.

Relevance of a Marriage Contract

One of the best ways for an injured/disabled spouse to protect their settlement is to have a marriage contract. Although not all issues can be resolved through a marriage contract, it can still address matters such as child support, custody, property division and spousal support.

In particular, a marriage contract can specify how the personal injury settlement will be divided and ensure that the injured spouse can remain in the home modified to accommodate their disability. The contract can also outline the amount of spousal support to be paid, if any, and establish a fair approach to distributing the settlement proceeds.

Importance of a Family Lawyer During an Injury Settlement

When an injured person faces divorce settlements, the avenues for “attacks” are many. Adding insult to injury, the spouse may even go as far as making accusations that the injury impairs the disabled person's judgment or makes them dangerous to, say, be a parent.

An injured person needs to work with a family lawyer to develop a strategy to respond to these accusations. Given the long-term financial impact of support payments, personal injury victims must understand their options and ensure that their settlements are protected.

By working with a personal injury lawyer and a family lawyer, an injured person can protect the benefits and settlement proceeds they require to support themselves throughout their life.

Headline Image: Adobe Stock/RHJ

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