How Are Legal Settlements Treated in Divorce?

Chicago Divorce AttorneyA $20 million wrongful conviction settlement received by Juan Rivera in 2015 raised a significant question for Illinois divorce courts: Was this settlement part of marital property? Rivera was convicted in 1992 of the rape and murder of a child in Illinois. During his imprisonment, Rivera met a woman and married in 2000. He was later cleared by DNA evidence and a court vacated his conviction in 2011, which led to Rivera suing various parties based on wrongful conviction. Had Rivera and his wife stayed married, both would have enjoyed the benefit of this settlement. However, in July 2014, Rivera filed for divorce from his wife. In March 2015, Rivera received approximately $11.4 million after taxes and attorneys’ fees, which led to this legal question.

 

Illinois Court of Appeals Finds Rivera’s Settlement to be Marital Property

 

This settlement became a contentious issue during the divorce. Rivera claimed the settlement was entirely his own property since it arose from an injury that occurred in 1992. As it was his own, it was not part of the marital estate and his wife had no claim to it. The trial court agreed with him. However, the appellate court was swayed by the ex-wife’s argument. She and her attorneys argued the wrongful conviction lawsuit arose and the award was made during their marriage, making the settlement marital property. Last year, the appellate court determined that Rivera’s cause of action did not accrue until his conviction was vacated in 2011, which was during the marriage, and not in 1992. Therefore, the settlement received from the lawsuit was marital property, to be divided equitably between Rivera and his wife.

 

Settlements Obtained During the Marriage Are Marital Property

 

The appellate court’s decision is consistent with Illinois law and previous court decisions regarding legal settlements obtain by a spouse. Personal injury settlements are often an issue during divorce, yet Illinois law is well established. A settlement or jury award is marital property, as defined by 750 ILCS 5/503, when it is obtained prior to the dissolution of the marriage and is based on a cause of action that arose during the marriage.

 

Dividing the Settlement During a Divorce

 

While the proceeds of a lawsuit may be marital property, this does not mean they are split 50/50. Illinois law states marital property should be distributed to the spouses equitably. An equitable or fair division of the settlement may entitle one spouse to a higher amount than the other. This is common for settlements obtained by an individual due to his or her personal injuries. While the individual’s spouse may also have suffered because of the individual’s accident and injuries, the spouse did not go through the pain and suffering. The individual who was injured may receive a greater amount of the settlement.

 

When Settlements May Not be Marital Property

 

There are instances in which the proceeds from a lawsuit may not be marital property. The two most common situations in which a settlement or jury award is only one spouse’s property are when:

 

  • A person’s right to sue arises before the marriage takes place, and
  • When a settlement is received after spouses have become legally separated under Illinois 750 ILCS 5/402.

If a woman were to sue another party based on a car accident that occurred in January 2016, and she was later married in June 2016, the proceeds she received from the personal injury suit would likely be her own – not marital property. However, the timing of the right to sue and the marriage may make this an issue for a judge, since a cause of action could arise mere days or weeks before the wedding.

 

A Chicago Divorce Lawyer Can Provide Sound Legal Advice

 

If you have questions regarding how a significant legal settlement will be handled in your divorce, contact me at (312) 621-5234 or email to schedule an initial consultation. I will gladly sit down with you and discuss how your income and assets, including proceeds from a lawsuit, will be treated by the court and potentially divided between you and your spouse.