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DIVORCE 35: Proceeds received by one spouse in a personal injury lawsuit are generally considered separate property.

In March 2005, the parties met. Plaintiff was an IT director. She and her three children from a previous marriage lived in a home located in West Bloomfield that she and her husband had purchased (the Michigan home).

Defendant was a divorced attorney who had stopped practicing. In November 2000, defendant filed a disability claim that was denied. Defendant owned a home in Northville, but following a foreclosure in 2005, was forced to move out and live with his parents.

At some point, defendant moved into the Michigan home, and the parties married on October 8, 2009.

Beginning in 2009, defendant began contributing substantial assets to the marriage, the first of which was a $300,000 bankruptcy settlement. In January 2011, defendant began receiving $25,600 a month in disability income. Finally, in March 2014, defendant received $667,000 as a settlement for a malpractice claim he filed against the attorneys that represented him on his November 2000 disability claim.

On January 28, 2013, the parties purchased a home in Florida (the Florida home). Both of their names were on the deed, but only defendant was on the mortgage.

In May 2014, defendant told plaintiff he wanted a divorce. Defendant claimed at trial that he had previously told plaintiff that he intended to divorce her as soon as he began receiving Social Security and Medicare benefits, but plaintiff denied that claim.

The parties separated between May 28, 2014 and June 3, 2014, and defendant moved more of his belongings from the Michigan home to the Florida home.

In December 2015, defendant demanded plaintiff stop taking his money and separate their banking accounts. Plaintiff gave defendant a proposed settlement in January 2016.

On numerous occasions, the trial court strongly recommended that the parties settle, but they ultimately proceeded to trial. The parties disagreed about which assets were separate and which were marital, as well as the value of most of the assets. The trial court was not impressed with either party as a witness and did not find either party to be credible.

The trial court awarded plaintiff the Michigan home, her two premarital pensions, and 50% of equity in the Florida home.  The trial court awarded defendant the rights to a book that he had been working on that plaintiff had assisted with, the Florida home with his 50% equity share, two dressage horses, and half the value of the marital portion of a retirement 403(b). Plaintiff was given sole responsibility for a tax lien on the Michigan home, and both parties were individually responsible for any credit card debt in their names.

Defendant took issue with multiple aspects of the trial court’s property division. While income earned by one spouse during the duration of the marriage is generally presumed to be marital property, there are occasions when property earned or acquired during the marriage may be deemed separate property.

Proceeds received by one spouse in a personal injury lawsuit meant to compensate for pain and suffering, as opposed to lost wages, are generally considered separate property. Moreover, 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. Defendant did not clearly recall how the settlement was spent, so there is no way to determine what, if anything, should have been considered separate property.

Are you facing a divorce in Michigan? Do you have questions about how your assets and your debts will be divided with your soon-to-be ex-spouse?

Financial issues are often the biggest concern for individuals and families who are facing divorce.

At the Plymouth and Ann Arbor law firm of Aldrich Legal Services, our attorneys understand the struggles you may face. We will work hard to help you obtain all to which you are entitled during your divorce.

Contact Aldrich Legal Services

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