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Michigan Family Law Blog

Wednesday, August 5, 2020

Can My Spouse Get a Share of My Lawsuit Proceeds in a Divorce?

There are many potential issues that one might face during a divorce including custody, parenting time, alimony and child support but almost every case involves the division of the couple's property and debts.  

How Does a Court Divide Property Between the Divorcing Couple?

The general rule is that marital assets are subject to relatively equal or "equitable" division between the parties as part of a judgment of divorce, but the parties’ separate assets are awarded to the individual that owns that separate property.  Property earned by one spouse while married is presumed to be marital property.  Only specific categories of property are deemed separate property of one spouse and not subject to division.   

Even separate assets may be invaded by the court when the estate awarded to a party to a judgment of divorce is insufficient for the suitable support of that party or any children of the marriage, after consideration of the circumstances of the case. The trial court may also award a party’s separate assets to the other party if it appears from the evidence in the case that the party contributed to the acquisition, improvement, or accumulation of the property.  Finally, separate assets may lose their character as separate property and transform into marital property if they are commingled with marital assets and treated by the parties as marital property.

Is a Settlement From a Lawsuit Marital Property? 

The case of Hill-Pouncy v Pouncy, Unpublished Michigan Court of Appeals Docket No. 345891 (March 24, 2020) provides an example of how the court should handle proceeds from a lawsuit when dividing property in a divorce.  That case involved the husband's settlement proceeds from a motorcycle accident.  The trial (divorce) court treated it as marital property and divided it between the parties, the Michigan Court of Appeals reversed that decision.

The appellate court stated that proceeds from a personal injury suit meant to compensate for pain and suffering are not joint marital property.  The court found that the proceeds received from the settlement were effectively classified as proceeds from a personal injury suit meant to compensate for pain and suffering and therefor where the husband's separate property.  The wife did not seek spousal support, the parties agreed to keep all of their separately owned assets with the exception of the proceeds, and there were no children of the marriage; therefore, plaintiff was not in need of a portion of the proceeds to maintain suitable support nor did she contribute to the acquisition, improvement, or accumulation of the property.  So there was no basis to invade the property.  Finally, the husband kept the proceeds separate so they were not commingled.  In that case, the Michigan Court of Appeals determined that the settlement proceeds were his separate property and awarded one hundred (100%) percent of the same to him.  

Oakland County Divorce Lawyers are Here to Help

While lawsuit proceeds are not often involved in divorce cases, there are many other issues which may seem simple on the surface can become quite complicated when the courts are involved.  No matter what your circumstances are, if you or your spouse are considering filing for divorce you should seek legal advice as soon as possible.  Contact our Michigan divorce lawyers today to speak with an attorney who will guide you through this challenging time.


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