A Texas Appellate court recently had to decide how to characterize the money a couple received from a personal injury settlement. In the case, the husband and wife sued a nursing home for negligence in caring for the husband. They asked for damages for past and future mental anguish, past and future pain and suffering, past and future disfigurement and impairment, past and future medical expenses, and exemplary damages. The wife also sought damages for loss of consortium. The husband and wife later settled the personal injury case.

Initial Presumptions

When the husband died and his trust had to be distributed a dispute among the beneficiaries required the Court to determine if the personal injury settlement was separate property or community property. The proceeds from the personal injury case were received during the marriage and are therefore presumed to be community property. In addition, the personal injury settlement did not itemize the damages being paid for each of the several claims which would have gone a long way to determining what portion was community property and what portion was separate property. The one important feature of the settlement agreement was that it did separate the damages paid to each spouse.

The Family Code

The Family Code explicitly characterizes personal injury recoveries as separate property except for damages paid to compensate for loss of earning capacity during the marriage. The courts have interpreted additional items that are treated as community property based on the logic of representing recovery for expenses associated with injury to the community estate such as medical expenses. Punitive damages had been labeled as community property in a previous case involving a contract dispute, but there is no statute that explicitly characterizes damages in contract cases as separate property like there is for personal injury cases. The Court relied on this distinction to determine that punitive damages in a personal injury case are not community property and do qualify for the special protections available to separate property.

Protect Your Rights

If you or your spouse received a personal injury settlement do you know how much of it is separate property and how much of it is community property? Work with an experienced Woodlands Divorce Lawyer and protect your rights.

Who Must Prove What?

When a spouse receives a settlement from a lawsuit during marriage, some of which could be separate property and some of which could be community property, it is that spouse’s burden to demonstrate which portion of the settlement is his or her separate property. This is important to remember, the person claiming the personal injury award as community property does not have to prove a thing unless the other spouse is able to establish the award is separate property by clear and convincing evidence. Call (832) 592-7913 and speak with a Woodlands Divorce Lawyer about protecting your rights if you or your spouse settled a lawsuit during your marriage.

Before even trying to figure out what a parent can pay as child support in Montgomery County your Woodlands Divorce Attorney must establish the parent’s resources. There are many different resources that the Conroe divorce court considers when awarding child support. Today we are going to look at one specific type of asset – the structured settlement annuity.

Structured settlement annuities are used to settle personal injury claims. In many ways they behave like a normal annuity that you might buy from a bank, but is it a resource for child support?

Should the entire payment be included as a resource?

Should none of the payment be included as a resource?

Should part of the payment be included as a resource?

The appeals court recently ruled on a case where they had to decide whether payments received as part of a structured settlement annuity are considered in the calculation of “net resources” for child support. The divorce court in this case excluded payments received from an annuity created from the proceeds of a personal injury settlement by creating a distinction between an annuity and a settlement annuity. Let’s see if they were correct.

The legal definition of resources we live with in Montgomery County includes:

all other income actually being received, including … annuities….

In addition to the definition of “resources”, the following items are not included as resources:

(1) return of principal or capital….

In this case, an annuity was purchased to pay out a settlement from a lawsuit over a span of years. The issue is whether the amounts received by the father, constituted a return of principal, which is not a resource, or whether it constitutes income that would be included as a resource.

The Attorney General relied on the simple use of the word “annuity” to claim the entire amount of every payment should be included as a resource. The father claimed no part of any payment should be included because the annuity in a structured settlement case represents a return of principal.

Correctly, the appeals court identified the critical components to an annuity, including a personal injury structured settlement annuity. In an annuity such as this one, there is a portion of each payment the represents a return of principal and a portion of each payment that represents interest. Since both sides to this case did not address this issue in the original divorce court the appeals court could not make a more detailed ruling.

Don’t make the same mistake they did and end up wasting time and money on an appeal and re-litigation in divorce court. Your Woodlands Divorce Attorney can analyze the annuity in your case to determine how much may be included as a income resource and how much may be excluded as a return of principal.

The Woodlands Divorce Resource is here to help you with your divorce, child custody, or other family law issue in Montgomery County or Harris County. Many of our visitors come from the areas of The Woodlands, Conroe, Oak Ridge North, Cut and Shoot, and other communities in the Montgomery County area or Houston and North Harris County. If you need legal assistance with your family law issue speak with a divorce lawyer in The Woodlands, TX today and protect your rights.

2009-TX-0706.713

IN THE INTEREST OF A.A.G.