When spouses who obtained compensation for personal injuries suffered by either or both of them subsequently divorce, they often dispute whether their compensation constitutes marital property subject to equitable division or rather the separate property of the recipient spouse. This article explores the legal principles governing the determination of that issue.
Generally, the classification of a spouse’s personal injury compensation depends on the specific purpose of the payment. “A personal injury claim settlement, to the extent that it represents compensation for pain and suffering and loss of capacity, is peculiarly personal to the party who receives it ... However, to the extent that the settlement amount represents compensation for medical expenses or lost wages during the marriage, the settlement may be considered an asset of the marriage. Any amount which is attributable to loss of consortium is not an asset of the marriage but is the estate of the spouse who suffered the loss of consortium.”(1)
The fact that personal injury compensation originated as a spouse’s separate property does not always end the classification analysis, however, because “a spouse can make a gift of non-marital property to the marital unit, which transforms the separate property into marital property, subject to equitable division.”(2) Indeed, a general rule provides that “[w]hen a gift is given to the marital couple, … the property will become marital property absent evidence of a contrary intent by the donor.”(3) The presumption of a gift of a spouse’s personal injury compensation to the marital unit commonly arises from the recipient-spouse’s deposit of the payment into a jointly-titled financial account or employment of the funds to purchase jointly-titled property.
One spouse also can make a gift of separate property to the other spouse rather than to the marital unit. As with gifts to the marital unit, Georgia law presumes that an inter-spousal transfer of separate property represents a gift which does not become marital property.(4) The presumption of such a gift typically arises when the recipient-spouse deposits a personal-injury payment into a financial account titled in the name of the other spouse alone or uses the payment to purchase property titled only in the name of the other spouse.
In order to rebut the presumption of a gift to the other spouse or to the marital unit, the spouse who transferred a personal injury award must present clear and convincing evidence that he/she did not thereby intend to make a gift to the marital unit.(5) A written agreement signed by the parties at the time of the transfer, specifying an intent other than a gift, obviously offers the most compelling evidence of a contrary intent.(6) Without such written agreement, a spouse can attempt to establish a non-gift intent through parol evidence of either a) an expressed understanding for a non-gift conveyance, or b) an implicit understanding shown by the nature of the transaction, or the circumstances or the conduct of the parties, at the time the transaction was consummated.(7)
(1) Johnson v. Johnson, 259 Ga. 658, 660, 386 S.E.2d 136 (1989), citing Campbell v. Campbell, 255 Ga. 461, 339 S.E.2d 591 (1986). (2) Coe v. Coe, 285 Ga. 863, 684 S.E.2d 598, 600(1) (2009). (3) Lerch v. Lerch, 278 Ga. 885, 886(1), 608 S.E.2d 223 (2005). (4) Dixon v. Dixon, 834 S.E.2d 309, 314(2) (Ga. Ct. App. 2019), citing Mallard v. Mallard , 297 Ga. 274, 277-278, 773 S.E.2d 274 (2015). (5) Brock v. Brock, 279 Ga. 119, 120(1), 610 S.E.2d 29 (2005); Talmadge v. Talmadge, 241 Ga. 609, 247 S.E.2d 61 (1978); O.C.G.A. § 53-12-131(c). (6) See generally Brock, supra, 279 Ga. at 119(1); Scales v. Scales, 235 Ga. 509, 510, 220 S.E.2d 267 (1975); O.C.G.A. § 53-12-131(a); and O.C.G.A. § 44-5-84. (7) Scales, supra, 235 Ga. at 510; and O.C.G.A. § 44-5-84.