Is My Wife/Husband Entitled To Half My Compensation Pay Out? (2024)

When a couple divorce, they will need to give thought to the financial claims they may make, and this includes awards of compensation acquired through claims made in other proceedings, such as damages for medical negligence or personal injury. But how much is your spouse entitled to if you divorce? Read our article for more information.

Will the compensation award be included in the matrimonial assets?

Although it is not always the case that compensation will be included within the matrimonial pot available for distribution between the parties, it is extremely difficult to ring-fence such a pay out and completely protect it from the scrutiny of the court. There are a great number of variables to every divorce situation and judges are seldom ever asked to consider the same factual circ*mstances twice. This is why the court is given such wide discretion to look at what would be the fairest outcome, whilst also having regard to the factors set out in section 25 of the Matrimonial Causes Act 1973.

The starting point for the court is to consider whether the compensation will be added into the matrimonial assets. They will decide this based on the facts of the case as to whether it should be shared alongside the other assets or withheld by the recipient. Matrimonial assets include property, finances, and any other assets that were acquired during the course of the marriage. These are considered shared assets and are generally subject to equal division. Non-matrimonial assets are those that are not directly linked to the marriage, making them less likely to be divided equally.

Such a distinction can be made in personal injury cases, for example. Here, a portion of the compensation may be designated for loss of earnings, which are more likely to be treated as a matrimonial asset and therefore shared equally. In contrast, awards used to purchase or support a family home, particularly if the funds become entangled with marital assets, can become challenging to classify as non-matrimonial.

The court will also take into account the recipient’s needs and the fact they gained the money by way of compensation rather than any other way. For example, if the sum awarded was small and specifically for pain and suffering, then the court may decide the money should not be available for division between the parties.

Alternatively, if a larger sum has been received, and part of it was for the partner’s future loss of earnings, then it is likely the court would consider this for suitable for distribution. This is because had the incident not occurred, but the divorce had still taken place, actual future earnings would likely be contemplated by the court as an asset to be shared.

How will compensation be divided if it is considered a matrimonial asset?

As alluded to above, probably the single most important factor to be considered in cases involving compensation is the needs of both parties, particularly the injured spouse. The court’s primary objective is to ensure that these needs are met, and if using the compensation award becomes necessary to meet those needs, the court may decide that a proportion of the funds should be transferred to the non-injured party.

The court will also look towards each person’s income, earning capacity, property, and any other financial resources each party has available to them. Besides these factors, the court will take disabilities and contributions made during the marriage into account.

Courts typically begin with the presumption that matrimonial assets should be shared equally between the divorcing couple. However, this principle does not extend to non-matrimonial assets, which creates a marked distinction in how assets are treated.

What can I do about my compensation if I am in the process of getting divorced?

In a 2011 case, the court decided to award the wife £285,000 of joint funds of £600,000, (£500,000 of which was the husband’s personal injury compensation), because she was the primary carer for their two children. This case went to the Court of Appeal, who agreed with the original decision; however, it added that a third should be refunded to the husband once the children reached 18.

The important takeaway from this decision is that the court will always try to balance the needs of any dependent children against that of the injured party.

How can I protect my compensation award?

There are two key ways to protect personal injury compensation. These are:

• Personal Injury Trust – this means you put all your compensation into a Trust and appoint Trustees to manage the funds on your behalf. You would need their permission to access the money. The division of assets during divorce proceedings can be influenced by these trusts and its impact on financial settlements depends on whether it is classed as a nuptial trust, signifying a connection to the marriage.

Here, the court will consider the primary purpose of the trust, its long-term objectives, and the circ*mstances surrounding its establishment. The breakdown of any damages received through the trust plays a crucial role. For example, funds allocated for the cost of care which addresses the injured party’s essential needs, may be less open to court intervention than those relating to general damages. As stated above, the court’s ultimate compass is the needs of the parties involved, particularly children. The court will therefore not hesitate to issue an order compelling the transfer of trust funds to satisfy the non-receiving spouse’s financial requirements if necessary.

• Prenuptial or post-nuptial agreement – according to a 2010 ruling, spouses should generally be bound by these agreements, except where it can be proven that they were either unfairly established or lead to unjust consequences. If you received compensation before marrying, you can put a prenuptial agreement into place which should help protect it. If you are already married, then you could consider making a postnuptial agreement instead.

When compensation awards are factored into divorce proceedings, it is important to take advice from recognised experts who have experience in dealing with such issues.