How a Personal Injury Payout is Treated in a Property Settlement

How a personal injury payout is treated in property settlement

A property settlement is rarely black and white, and it can sometimes seem that a personal injury payout only serves to complicate the issue. Before we look at how a personal injury payout is treated in a property settlement, it is helpful to understand how a property settlement is determined.

How is a property settlement determined?

The Family Law Act sets guidelines to help determine a property settlement. This is essentially a four-step process:

  1.  All property and assets owned separately and jointly by the parties, along with any liabilities (such as a mortgage) are identified. This is known as the ‘asset pool’.
  2. The financial, non-financial, homemaking and parenting contributions that each spouse has made are considered.
  3. The future needs of each party are considered. When determining future needs, a court will look at a number of factors including the age and health of each party, care of children and earning capacity.
  4. It will be determined whether the proposed division of property and assets is ‘just and equitable’.

Is a personal injury payout considered in a property settlement?

The Family Law Act gives a wide definition of what constitutes ‘property’ when determining the asset pool. A personal injury award falls within this definition and is therefore treated as part of the asset pool and should be considered in a property settlement.

This is further cemented in common law, wherein the case of Aleksovski v Aleksovski (1996), a personal injury payout was found to be a financial contribution. The court held that:

“In our opinion, in most cases, a damages verdict arising from a personal injury claim, whenever received, is a contribution of the party who suffered the injuries. It should not be considered in isolation for the reason that every contribution, which each of the parties makes to the relationship, must be weighed and considered at the same time.”

How does a personal injury payout affect a property settlement?

A property settlement gives each party a percentage of the asset pool based on their contributions and future needs. The end goal of any property settlement is that both parties achieve a ‘just and equitable’ outcome. The existence of a personal injury payout does not affect this goal.

A large personal injury payout will impact upon a property settlement to the extent that it may significantly impact the contributions made by one spouse, meaning an adjustment would likely be made accordingly.

Also, because the future needs of each party are considered, if a personal injury award is necessary because one party can no longer earn or requires ongoing medical treatment, then an adjustment would also be made to cover these needs to ensure both parties walk away with equal prospects.

What is a ‘just and equitable’ outcome?

Different parties will have different ideas about what is a ‘just and equitable’ outcome, and this is where complications arise. If you’ve been injured and you are unsure how a property settlement will affect your personal injury payout, you can speak with a family lawyer. With an experienced family lawyer on your side, you can ensure your contributions are recognised, and your future needs are provided for.

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