How Personal Injury Settlements Are Treated on Divorce
Although personal injury compensation is awarded to meet the unique and ongoing needs of an injured individual, the Family Courts do not always treat these funds as ‘off-limits’ when dividing assets between divorcing spouses. In divorce proceedings, the court has wide discretion to divide assets in a way that achieves ‘fairness’ and equalises the parties’ positions post-divorce. The courts can look beyond the initial ownership of money or property, and can take into account a wide variety of factors, including the needs, health, earning capacity, and responsibilities of the parties. Because of this wide discretion, personal injury settlements can sometimes be vulnerable to division.
How a Nuptial Agreement Can Help Protect a Personal Injury Settlement
One of the most effective ways to safeguard a personal injury settlement is by entering into a Nuptial Agreement (often referred to as a ‘Pre-Nup’ or a ‘Post-Nup’).
A Nuptial Agreement is a legal contract entered into by a couple either before or during their marriage or civil partnership. The purpose of such an Agreement is to enable the couple to plan ahead and formally record their joint intentions regarding how their finances, property, assets, and liabilities should be treated if their marriage later breaks down.
There are two main types of Nuptial Agreement:
Entered into before the marriage or civil partnership.
Entered into during the marriage or civil partnership.
Vikki Martin, Partner and Head of the Family Department shares:
“In recent years Nuptial Agreements have become increasingly common and many couples now see them as a practical and responsible step. While they are not strictly legally binding on the family Courts, a well prepared Nuptial Agreement remains one of the most effective tools for protecting assets, such as personal injury settlements, should a marriage break down. They offer clarity, fairness and, above all, security at a time when people need it most.”
Entering into a Pre-Nuptial Agreement or Post-Nuptial Agreement can provide an important layer of protection, particularly where one party has received a significant personal injury settlement. The terms of a Nuptial Agreement can:
- Confirm ownership of the settlement: by clearly stating that the personal injury settlement belongs solely to the injured individual.
- Ring-fence the settlement: by identifying the compensation as separate, non-matrimonial property, helping to reduce the likelihood that it will be divided upon divorce.
- Provide clarity for both partners: by establishing clear expectations about financial arrangements from the outset of the relationship.
For couples where compensation has already been received prior to marriage, a Pre-Nuptial Agreement can protect those funds from the beginning of the relationship. Where compensation is awarded during the marriage, a Post-Nuptial Agreement can achieve similar protection.
Nuptial Agreements Can Reduce Future Disputes and Litigation
The existence of a well-drafted Nuptial Agreement can significantly reduce the likelihood of financial disputes if a relationship later breaks down.
By setting out the couple’s intentions in advance, the agreement can:
- Minimise uncertainty;
- Discourage contested financial proceedings;
- Reduce legal costs; and
- Ease emotional strain during a divorce.
Are Nuptial Agreements Legally Binding?
In England and Wales, Nuptial Agreements are not strictly legally binding. The Family Court always retains the final discretion to decide what is fair in the circumstances of a divorce. However, where a Nuptial Agreement has been drafted properly, fairly, and with appropriate safeguards in place, a court is likely to give more weight to its terms in the event of a dispute. Key safeguards include both parties obtaining independent legal advice to ensure they understand the implications of the Nuptial Agreement, and participating in full and frank financial disclosure before the Nuptial Agreement is signed.
Why Protecting Your Settlement Matters
A personal injury settlement is more than an asset, it is a financial lifeline designed to support an injured person’s future medical care and living needs. Losing part of these funds in a divorce could undermine the very purpose of the award. Entering into a Nuptial Agreement is a proactive, protective step that can help ensure compensation remains available for its intended purpose. A fair and well-drafted Nuptial Agreement, supported by legal advice, can be a persuasive factor that the courts may take into account in the event of a dispute as to the division of assets.
Speak to Our Team of Specialist Lawyers Today
At Wolferstans Solicitors, we understand how important it is to protect your personal injury settlement. Our specialist Family Law and Personal Injury teams work closely together to provide advice for clients who have received significant injury settlements and want to safeguard their financial future. If you have received compensation following a serious injury and are planning to marry or enter a civil partnership, our experienced family lawyers can help you put the right protections in place.
Get in touch today to arrange a chat with one of our experienced lawyers on 01752 292 292 or email clientservices@wolferstans.com