Is my compensation payment protected after separation?

Many people assume that compensation payments received during a relationship are automatically protected from a property settlement. However, depending on the circumstances, compensation payments may be considered in family law property proceedings.

Where one party has received compensation for personal injury, workers compensation, or another type of loss, the Court may need to determine whether the payment should be included in the property pool, treated as a financial resource, or otherwise taken into account when dividing assets.

What types of compensation payments are considered?

Compensation payments can arise in many different circumstances, including:

• personal injury settlements;
• workers compensation payments;
• motor vehicle accident claims;
• insurance payouts;
• medical negligence claims; and
• disability-related compensation.

The way the payment is treated will depend on the purpose of the payment, when it was received and the circumstances of the relationship.

Is a compensation payment property?

A compensation payment is not automatically treated as property available for division.

The Court will consider the nature of the payment and what it was intended to compensate for.

For example, a payment may include compensation for:

• pain and suffering;
• loss of future earning capacity;
• medical expenses;
• past or future economic loss; or
• care and assistance required because of an injury.

Different components of a compensation payment may be treated differently.

A payment intended to compensate a person personally for pain, suffering or loss may be treated differently from a payment intended to replace income or provide ongoing financial support.

Compensation received during the relationship

Where compensation is received during the relationship and used for the benefit of the family, it may be considered relevant when determining a property settlement.

For example, if compensation funds are used to:

• purchase or renovate the family home;
• reduce the mortgage;
• pay household expenses; or
• accumulate savings,

those funds may become part of the parties’ financial circumstances.

The Court may also consider whether the payment represented a contribution made by the injured party.

Compensation received after separation

Where a compensation payment is received after separation, the treatment can be more complex.

The Court may consider factors including:

• whether the claim arose during the relationship;
• whether the other party contributed to the circumstances leading to the claim;
• whether the payment relates to the injured party personally;
• whether the funds have been preserved or used; and
• the future needs and financial circumstances of both parties.

A post-separation payment is not automatically excluded simply because it was received after the relationship ended.

Compensation as a financial resource

Even where a compensation payment is not treated as property, it may still be relevant as a financial resource.

A financial resource is something that may provide a party with financial benefit but is not property capable of being divided.

Examples may include:

• a future entitlement under a compensation claim;
• ongoing insurance payments; or
• income replacement benefits.

The Court may consider the existence of a financial resource when determining whether a proposed property division is just and equitable.

This article is general information only and does not constitute legal advice. Every matter is different — speak with one of our family lawyers about your specific circumstances.

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