Structured Settlements and Divorce

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The way Structured Settlements are handled in Divorce can vary.  There are two key factors that determine how structured settlements are processed in a divorce; where you live and how your settlement agreement was written.  During this difficult time in your life you will want to know as much about your Structured Settlement as possible, so you can be sure your assets are protected.

So what actually happens to structured settlements during divorce?

How state laws affect structured settlements in divorce

Unfortunately this is a complex subject because each state sets their own independent laws regarding asset division in divorce. States divide assets according to either “Equitable Division” or “Community Property” laws and you have to check the laws in your state to determine which laws apply to your specific divorce case.

  • If you live in a state with equitable distribution, and you received your settlement before you were married, it is likely you will keep the settlement.
  • However, according to community property laws anything either spouse owned before and/or during the marriage is considered property of the union and can be subject to division.

A little more about Equitable Distribution

States with “Equitable Distribution” laws generally focus on when the settlement was issued to determine how a structured settlement is handled in a divorce.  If issued during the marriage, the structured settlement may be considered marital property and subject to equitable distribution.  This does not automatically mean each party will be awarded half.  In some cases the person the settlement belonged to may receive a larger portion.  If the structured settlement was issued before the marriage, it is more likely to be considered non-marital property and the person the settlement belonged to will likely receive all of the structured settlement.

Some other factors to consider

There are also medical factors that can affect how structured settlements are handled in divorce.  In the case where a structured settlement is issued due to a medical condition, the affected spouse may receive a significantly larger portion if not all of the settlement. In this situation, a divorce lawyer or mediator with experience dealing with structured settlements should be consulted. When dividing assets in a divorce, a structured settlement is not always split between the spouses.  Typically, a spouse who does not receive any part of a structured settlement will receive a larger portion of a different asset. This balances out the overall division of assets between the spouses.

Find out more about Client First Settlement Funding.