Spouse's Rights to Settlements
If a person sues another, he may later choose to settle the case for a certain amount of money. If the person who commenced the lawsuit is single, then this money is his and no one else's. However, if the person is married, part of the settlement may, depending on the jurisdiction, go to his spouse. The Western states (such as California, Arizona and Nevada) typically follow the community property rules on dividing these awards, while those in the East (such as New York and Massachusetts) usually adopt the common law.
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Community Property
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Community property states generally regard property acquired during a marriage---other than by gift, will or inheritance---as being part of the couple's community property. Thus, a lawsuit settlement award acquired by a spouse during the marriage is considered community property. Each spouse generally possesses the right to one-half of the community property. Thus, half of the settlement award goes to each spouse unless such a division of property is unfair (there is not enough community property to support one spouse while the other spouse has enough community and separate property to support himself).
Separate Property
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Community property states regard property acquired outside of marriage or in certain circumstances during marriage as being separate property. Property acquired by gift, inheritance or will is separate property at all times regardless of marriage. A settlement award acquired by one spouse before marriage or after divorce is that spouse's separate property and does not need to be divided with the other spouse.
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Common Law
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Common law jurisdictions consider almost all property acquired by the spouses as their sole and separate property. If a spouse acquires property before, during or after marriage, such property is his or her sole and separate property unless the couple agree to a different arrangement. However, courts impose rules which sometimes result in some of this property's being transferred to the other spouse. For example, a court may require a spouse with bigger earnings to pay spousal support to the other spouse. Thus, a settlement award obtained by a spouse is that spouse's sole and separate property and he may do with it as he pleases unless he must use it to satisfy a court judgment to the other spouse.
Personal Injury
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The states take different approaches to personal injury (PI) settlement awards. Courts in some states give more of the settlement award acquired during marriage to the injured spouse, but they may give the rest to the other spouse. In other states the PI settlement award is always the injured spouse's separate property and thus the other spouse is not entitled to any portion of it. And in other jurisdictions the type of award determines who should obtain it. For example, an award for "pain and suffering" will go to the injured spouse because she is the one suffering from the injury, while awards for medical bills go to the spouse who paid those bills.
Contracts
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Contract law enables spouses to obtain a right to settlement awards. Community property and common law states generally permit the spouses to form agreements regarding the distribution of their property upon death or divorce (i.e., prenuptial agreements). Thus, in a state treating settlement awards as the separate property of an injured spouse, the other spouse can gain a portion of that award by entering into a valid contract with the injured spouse for a share of the award.
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