The laws on how workers’ compensation factors in a divorce settlement vary by state. If workers’ compensation benefits or settlements are considered marital property, they may be divided between the parties. However, whether benefits or a settlement constitute marital property can be a complex and subjective determination. Therefore, those who are wondering how their workers’ compensation settlement will affect their divorce settlement should seek the counsel of a qualified attorney in their local area. The Philadelphia workers’ compensation lawyers at Larry Pitt & Associates, P.C. provide skilled legal representation to injured workers throughout Pennsylvania and can help explain how the law applies to your particular case.
Property Distribution Models
Most states follow either the community property or the equitable property distribution model of property division for divorce. Community property states consider any assets acquired during the marriage to be marital property. Those assets are divided equally (50/50) in the divorce settlement. Equitable distribution states like Pennsylvania also consider anything acquired during the marriage to be marital property. However, those assets are not split equally, but rather equitably, between the spouses.
Some states follow the analytic approach for determining whether a workers’ compensation settlement is marital property that should be divided between the spouses. In those states, income acquired either before or after a divorce may be considered separate property that is not subject to distribution. Therefore, courts may consider awards that cover future medical expenses, lost wages, or disability to be separate property not subject to distribution. Awards that cover such expenses during the marriage, on the other hand, may be considered marital property, subject to either equal or equitable distribution.
Pennsylvania Workers’ Comp Settlements and Divorce
Judges in equitable distribution states must make the subjective determination of what is fair when dividing marital property between the parties. Therefore, if a workers’ compensation settlement is considered marital property, the court must decide how to equitably, or fairly, divide the award.
To first determine whether an award should be classified as marital property, Pennsylvania courts look to when the right to receive the award accrued. According to Pennsylvania statute, property acquired during the marriage is presumed to be marital property. Therefore, workers’ compensation awards received during the marriage are considered marital property that is subject to distribution unless it falls under one of the statutorily excluded categories.
Pennsylvania has generally rejected the analytic approach and instead leans towards the mechanistic approach. Unlike the analytic approach, the mechanistic approach does not give any weight to what type of award is granted. Whether the award was meant to replace lost wages or future earnings generally irrelevant. Rather, the court only considers when the right to receive the payment arose. If it arose during the marriage, then the award may be considered marital property, subject to equitable distribution between the parties.