Property settlements can be complex, especially when the separating couple has a large asset pool.
But what happens when one spouse has received a large personal injury compensation awards payment? Is this considered a ‘contribution’ to the overall property pool are personal injury awards treated separately?
There is no precise mathematical formula in calculating a division of property. However, the Family Law Act does set out a number of steps to work through when determining a property settlement.
The Process of Property Settlement Under the Family Law Act
The first step in a property settlement is to identify and value all of the property owned by the parties, including any property owned jointly or separately. The second step is to evaluate the contributions of the parties to the marriage or de facto relationship. This includes financial contributions, non-financial contributions and contributions made as a parent or homemaker.
Thirdly, the court will take into consideration the factors affecting the future needs of each party. They may consider the age and state of health of the parties, whether either party has the care and control of the children of the relationship (under the age of 18 years), the extent to which the marriage has affected the earning capacity of either party, and any other factor the court deems relevant.
Lastly, the court will determine whether the proposed division of property is “just and equitable”.
Property Settlement in Divorce & A Personal Injury Settlement
In the case of Aleksovski v Aleksovski the Full Court considered the treatment of a personal injury claim in a property settlement. The separating couple had three children of the marriage and earned similar incomes. Eight years prior to separating, the wife was injured in a motor vehicle accident and received $143,000 in compensation.
The Trial Judge treated the personal injury compensation amount as a “financial contribution” of the wife, and allowed a 15 per cent adjustment in her favour. The wife was given a 77 per cent share of the total property pool.
The husband appealed the decision and the wife’s entitlement decreased by 15 per cent, to 62 per cent. In their judgment Justices Baker and Rowland held that, in most cases, a personal injury payout will be treated as a contribution by the party who suffered the injury, and adjustments will be made accordingly.
The circumstances of the personal injury award may also be considered as a factor affecting the future needs of the injured party, if it impacts on their earning capacity.
If you are seeking advice tailored legal advice about a property settlement, our team is here to help. Emma Meed is an accredited family law specialist, assisting clients with a range of complex legal matters. Call us on 4902 3800 or email [email protected]
About the Author
Emma Mead is an Accredited Specialist in Personal Injury Law, accredited by the Law Society of NSW. She is also a National Accreditor Mediator and has a Graduate Diploma in Family Dispute Resolution. She specialises in all personal injury and family law disputes, locally and across New South Wales.