California is a community property state. Accordingly, many forms of property are divided 50/50 in divorce. For instance, a car purchased during the marriage may be considered community property and subject to 50/50 community property division in divorce. However, some forms of property such as car accident settlements are less clear-cut. Proceeds from an auto accident lawsuit or settlement can represent compensation for various injuries including property damage, lost income, and personal injury.
Property Damage / Lost Wages
In addition to personal injury damages, an auto accident attorney may seek compensation for property damage and lost wages. For instance, the victim’s car may have been damaged by a negligent driver in a car accident which resulted in injury and time off work. As a result, the lawsuit may include, in addition to damages for personal injury, claims for property damage and lost wages. In a future divorce, any car accident settlement that compensates for property damage or lost wages would most likely be considered community property and subject to 50/50 division.
Personal Injury Exception
In contrast, personal injury damages are considered community property but are subject to an exception to the general 50/50 division rule created by Family Code Section 2603(b). The statute requires the court to allocate “community estate property damages” to the injured spouse unless the court finds that the “interests of justice” require a different division, although the injured spouse must receive at least half of the damages.
In gauging whether the “interests of justice” require a different allocation of community estate property damages the court must consider the “economic condition and needs of each party, the time that has elapsed since the recovery of the damages or the accrual of the cause of action, and all other facts of the case, determines that the interests of justice require another disposition.” (Family Code Section 2603(b)).
While community property personal injury damages must generally be allocated to the injured party, if the damages were commingled with community property such that it is impossible to trace the source of the funds, the damages may lose their status as community property personal injury damages, making the commingled damages subject to regular community property division.