When going through a divorce in Canada, the division of assets and liabilities is a significant issue that must be dealt with. If you received your personal injury settlement during your marriage, it’s crucial to learn the effect it will have on your divorce settlement. This article will discuss what happens to personal injury settlements in divorce in Canada. 

In Canada, personal injury settlements are subject to division during divorce. This means that the settlement received due to a personal injury claim is divided between the spouses as part of the property division process. The court will consider various factors in determining how to divide the settlement, such as the length of the marriage, each spouse’s contributions, and the couple’s overall financial situation. To know more about divorce in Canada and personal injury settlement, visit this website.  

When a Canadian Couple Divorces, How are Assets Split? 

In Canada, when a couple divorces, the process of dividing their assets is typically determined through negotiation or court proceedings. If the couple can reach an agreement through negotiation, the settlement terms will be reflected in a separation agreement or divorce order.  

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As a way to avoid court, consider reading, “Why Choose Alternative Dispute Resolution (ADR) If You are Divorcing.”

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Suppose the couple is unable to settle. In that case, a judge will decide on their behalf based on several factors, including the length of the marriage, each party’s income and earning potential, the value of the assets and debts, and the needs of any dependent children. The judge will also consider any agreements or arrangements made between the parties. The overall goal is to reach a fair and equitable division of assets that considers each case’s circumstances.

Questions and Answers From a Personal Injury Lawyer 

When a couple undergoes divorce in Canada and is dealing with a  personal injury settlement, the personal injury settlement may be subject to division. Legal proceedings of divorce are intricate. Divorce laws in Canada dictate whether a former spouse is eligible for a settlement and, if so, the amount they can receive. Here are some essential details to consider.

• Can a Spouse Who Didn’t Suffer an Injury Collect a Settlement?

  Even if the insurance company initially decided to pay the compensation to you alone, a court may declare that the settlement is community property if it was granted for the injury of a child, for example. 

  If there’s a personal injury settlement, your spouse may be entitled to compensation if they suffer financial hardship due to your injuries. If you were in a vehicle accident by yourself and injured, your husband would have to take care of the kids and housework while you recuperate. 

• What Happens to the Injuries Sustained During the Marriage and the Resulting Settlement? 

  In a divorce in Canada and personal injury settlement, the settlement may come in cash or a check during a marriage. How this money is split depends on whose name is on the case and what it was used for. 

  An award for damages from a personal injury one spouse got while married is their property. When a couple files a joint lawsuit, the law says that the classification of the settlement money will determine which spouse gets it.

  Such an award would go to the spouse who suffered the most due to the incident in question in terms of pain and suffering. The other spouse will receive the reward if it’s determined that they had suffered a loss of comfort and companionship as a result of the marriage.  

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What else should you be thinking of if you are dealing with divorce as a woman? Check out “55 Must-Do’s on Your Modern Divorce Checklist.”

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• How Does the Court Divide the Settlement?

  In Canada, the division of assets and liabilities must be considered in the divorce. In Canada, personal injury settlements received during the marriage are considered marital assets and must be split between the partners. The court will consider various factors when determining how to divide the settlement, including the length of the marriage, each spouse’s contributions, and the couple’s overall financial situation.

  The court will take into account the characteristics of the personal injury and the effect it had on the spouse who received the settlement. For example, if the injury resulted in a permanent disability, the court may consider this in determining how to divide the settlement. The court may also take into account any special needs or costs that may come up because of the injury, like medical bills or the cost of making changes to the home.

  Another essential factor to consider is the use of settlement funds. Suppose the settlement is used to pay for medical expenses related to the injury. This could affect how the assets are split during the divorce and whether or not spousal support is given. The court will take into account the extent to which the settlement funds were used to benefit both spouses and the extent to which they were used to benefit only one spouse.

• Can a Personal Injury Settlement Affect How Spousal Support is Paid?

  Even if the insurance company initially decided to pay the settlement to you alone, a court could say that the money belongs to both of you if, for example, it was given because your child was hurt. 

  Again, if the settlement was because of a personal injury, your spouse might be able to get money if they have trouble paying their bills. If you were in a vehicle accident by yourself and injured, your husband would have to take care of the kids and housework while you recuperated. 

• What Are the Tax Implications of Personal Injury Settlements in a Canadian Divorce?

  In addition to the division of assets and liabilities, it’s essential to consider the tax implications of a personal injury settlement in a divorce. Depending on the circumstances, a personal injury settlement may be taxed differently than other forms of income or property. 

  Typically, in Canada, settlements received for personal injury covering aspects such as pain and suffering, loss of income, or other non-economic damages are not subject to taxation. However, settlements for economic damages, such as medical expenses or lost wages, may be subject to tax.

  It’s crucial to consult a tax professional to understand the potential tax consequences of a settlement in your specific case. A tax expert can help you figure out how the settlement will affect your taxes, including how it will affect your overall tax bill and if there are any tax planning strategies you want to use.

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You will ALWAYS want to be mindful of what would be the best business transaction for you as you divorce. Read our  “What Divorce Does to a Woman: You and Your Money.”

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The Takeaway

If you are considering a divorce in Canada that involves a personal injury settlement, you should find out how it might affect your divorce. Add it to your list of questions to ask a divorce attorney at a consultation. A divorce lawyer can assist you in understanding the laws and regulations relevant to your case and safeguarding your rights and concerns during the divorce process. 

To sum up, a personal injury settlement acquired during the course of a marriage in Canada is considered marital property and, therefore, eligible for division in the event of a divorce. Knowing the different factors that affect the outcome, the possible tax effects, and how to protect your rights and interests is important. Working with an experienced divorce lawyer can help you get a fair settlement that meets your needs, protects your rights and interests, and is fair to both of you.

NOTES

Brady Lowder is an intern in a law firm specializing in personal injuries and workplace compensations. He believes that everyone is entitled to free legal advice, so he writes guest posts and blog articles about legal matters on the side. His hobbies include playing board games and reading books that are not law-related.

Whether you are considering a divorce or already navigating the confusing experience, one thing we see making a significant difference for women is the conscious choice to not do divorce alone. Since 2012, smart women around the world have chosen SAS for Women to partner them through the emotional, financial, and oftentimes complicated issues of divorce. 

“A healthy divorce requires smart steps, taken one at a time.” ~ Liza Caldwell, SAS Cofounder.

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*We support same-sex marriages. For the sake of simplicity in this article, however, we refer to your spouse as your “husband” or a “he.”