Is a Personal Injury Settlement Marital Property Subject to Division in a Divorce?

When a couple decides to divorce, one of the most complex and emotionally charged aspects of the process is dividing property. From real estate and retirement accounts to family businesses and personal belongings, determining who gets what can be challenging. But what about a personal injury settlement? If one spouse receives money from a personal injury claim during the marriage, is that settlement considered marital property in Illinois?

The short answer is: it depends.

In this post we will unpack how Illinois law treats personal injury settlements in divorce, and what factors the courts consider when deciding whether that money should be split between spouses.

Illinois Law on Marital vs. Non-Marital Property

Under Section 503 of the Illinois Marriage and Dissolution of Marriage Act, property acquired during the marriage is generally considered marital property, and is therefore subject to equitable distribution during a divorce. See 750 ILCS 5/503. This means the court divides marital property in a manner that is fair—but not necessarily equal.

However, not all property acquired during the marriage is marital. Section 503(a) of the statute lists certain exceptions to what is considered marital property, including:

• Property acquired by gift, legacy, or descent;
• Property acquired in exchange for property acquired before the marriage;
• Property acquired after a judgment of legal separation;
• And importantly for our discussion: property acquired by a spouse after a judgment of dissolution or declaration of invalidity of marriage, or property excluded by valid agreement between the parties (such as a prenuptial agreement).

But what about personal injury settlements? The law doesn’t ignore them—rather, it treats them based on the purpose of the compensation.

Personal Injury Settlements: Mixed or Separate Property?

In Illinois, personal injury settlements can be classified as marital, non-marital, or a combination of both, depending on what the settlement compensates for.

The courts typically look at how the settlement is allocated. For example:

Compensation for lost wages during the marriage is usually considered marital property. That’s because wages earned during the marriage would be shared, so compensation replacing those wages is also shared.

Compensation for medical expenses paid out of marital funds could also be treated as marital property.

On the other hand, damages for pain and suffering, disability, or disfigurement are more likely to be considered non-marital, as they are seen as compensating the injured spouse personally.

This distinction is crucial. The Illinois Supreme Court has addressed this issue, notably in the case of In re Marriage of Gan, where the court emphasized that the nature of the compensation determines whether it is marital or non-marital property. In re Marriage of Gan, 83 Ill. App. 3d 265, 270 (1980).

Timing Matters, Too: In re Marriage of Rivera

Another important factor is when the cause of action arose. If the injury and the resulting claim occurred before the marriage, the settlement is generally considered non-marital property. If the resulting claim occurred during the marriage, then the compensation is presumptively marital property which the Court must divide according to the analysis above.

In re Marriage of Rivera offers insight here. In Rivera, a husband had a personal injury claim against the State of Illinois, Lake County, and other entities, for a violation of his rights related to a false criminal conviction. Husband was originally arrested in 1992 and remained imprisoned until 2012. Husband and Wife were married in 2000. After a series of appeals, Husband’s criminal conviction was overturned in 2012, and he was released from prison. Husband filed a lawsuit for personal injury related to the false conviction in 2012. Husband filed for divorce in 2014. In 2015, he reached a settlement with the State of Illinois for approximately $20 million dollars.

During the dissolution proceedings, Husband argued that his entire settlement was nonmarital property because the injury that gave rise to his claim, namely the false imprisonment, occurred prior to the marriage. Wife argued that the settlement was marital property because the cause of action, namely the personal injury claim that Husband filed, only arose after his conviction was overturned, which occurred during the marriage. The trial court ruled in favor of Husband, that because the injury (false imprisonment) had occurred prior to the marriage, the claim and resulting settlement resulting from that injury are nonmarital property. However, the trial court recognized that this was a novel issue. It certified this question for appeal: “Whether the settlement proceeds received from a wrongful conviction action are marital property when (a) the coerced confession and initial conviction occurred before the marriage, and (b) the conviction was reversed during the marriage.”

The appellate court, after a thorough review of case law, determined that a cause of action is marital property if the cause of action accrues during the marriage, meaning the date that the claimant had a right to file a claim for damages. Here, Husband could not file his claim for the wrongful conviction until the conviction was overturned in 2012. Because that claim did not arise until after the parties were married, despite the actual injury taking place in 1992, the appellate court ruled that the settlement was marital property subject to division in divorce and remanded the case for further proceedings consistent with that opinion.

How Courts Divide a Settlement

When a personal injury settlement is determined to be partially marital and partially non-marital, the court may use evidence—such as the settlement agreement, court filings, or testimony—to allocate the funds accordingly. If the settlement agreement specifies how much of the money is for lost wages versus pain and suffering, the court can use those figures. If the agreement is silent, the court may need to make its own determination.

Importantly, even if a portion of the settlement is classified as non-marital, the value of that asset can still have indirect effects on the division of marital property. For instance, if one spouse keeps a large non-marital settlement, the court might award the other spouse a greater share of marital assets to achieve an equitable result.

What Should You Do If You’re Facing Divorce and Have a Settlement?

If you’ve received—or expect to receive—a personal injury settlement and are considering divorce, it’s essential to speak with an experienced Illinois family law attorney. A knowledgeable attorney can help:

• Analyze the components of your settlement;
• Advocate for a fair classification of the funds;
• Ensure the settlement is properly presented and documented to the court.

Similarly, if your spouse has received a settlement, your attorney can help determine whether you’re entitled to a share.

Personal injury settlements can add a layer of complexity to divorce proceedings. Understanding how Illinois law treats personal injury settlements is key to ensuring a fair and equitable division of property. Contact O. Long Law, LLC today to connect with one of our experienced family law attorneys.