Wednesday, February 29, 2012
An individual may be entitled to a monetary settlement for many various reasons. Perhaps, the most frequent reason that a person may receive a settlement is as part of the resolution of a claim arising from an injury or workers compensation claim. Individuals also may receive settlements as part of a class action lawsuit or other civil claim.
Recently, the Supreme Court of Pennsylvania clarified in Focht v. Focht whether the funds received as part of a settlement are considered marital property during equitable distribution. In general, property or assets acquired prior to the date of marriage OR after the date of separation are not marital property. Anything acquired between the date of marriage and the date of separation is considered marital property, and therefore is subject to equitable distribution upon divorce. Under this general standard, if both the cause of action and the settlement occur during the marriage, then the funds are clearly marital property subject to equitable distribution. Likewise, if both the cause of action and settlement occur either before the date of marriage or after the date of separation, then the funds are non-marital property.
The issue becomes a bit more confusing if the either the cause of action accrues prior to the date of marriage or the settlement is received after the date of separation. In Focht, the Court clarified that the rule for determining whether the funds are marital property depends on when the cause of action accrues. In relation to a “cause of action,” the word “accrue” has a specific legal meaning, and the Court cites the definition as “to come into existence as an enforceable claim or right; to arise.” The Court further clarifies that “a cause of action accrues only when one has the right to institute a suit.” In other words, a cause of action accrues when an individual knows or should know that something has occurred that gives him or her the right to pursue legal action and a potential financial award or settlement.
For example, if an individual is crossing the street and is hit by a car, then the cause of action accrues when the accident happens. Using this example, an individual might file a lawsuit against the driver. Litigating the case may take years and the injured individual may not receive the settlement until quite some time after the actual injury occurred. If you add a marriage and divorce into the scenario, an individual could easily be married or divorced during the span of the litigation. Under the Focht case, determining whether the injured individual’s settlement is marital property would depend on the marital status of the person when they were hit by the car. If the person was hit by the car prior to the date of the marriage, then it does not matter whether the settlement is received prior to or after the date of marriage. The settlement will be non-marital property. On the other hand, if the person was hit by the car after the date of marriage but before the date of separation, then it does not matter whether the settlement is received prior to or after the date of separation. The settlement will be marital property.
If you are going through a divorce, consult with your attorney regarding any settlement that you have received or may receive in the future, as specific facts and nuances in each case can change the legal scenario.
Written by Elizabeth A. Bokermann, Esquire, associate attorney at The Law Offices of Linda A. Kerns, LLC.