Are Punitive Damages Community Property?

In every Woodlands Divorce case your attorney will review the assets and debts that exist between you and your spouse. After the assets and debts are identified your Woodlands Divorce Attorney will then work with you to discover which assets may qualify as separate property and can benefit from the special protections available to separate property in a divorce. If you or your spouse received funds as part of a personal injury settlement, a portion of the settlement or award may have been categorized as punitive or exemplary damages. Are punitive damages community property or separate property?

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.