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Employment or disability settlements – marital or non-marital?

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Are employment or disability settlements occurring during the marriage marital property?

ANSWER

Probably not, to the extent the settlement covers post-divorce loss of earnings. However, there may be arguments if there is a lump sum settlement awarded during the marriage.

Generally, an ex-spouse’s earnings after divorce are not marital property, and benefits compensating for loss of those earnings are not subject to division. This theory relies on a case concerning a workers’ comp permanent disability award, in which the Colorado Court of Appeals ruled that since such an award compensates for future loss of earning capacity, a husband’s pending claim for permanent disability benefits is marital property only to the extent it compensates for lost marital wages or for medical care and other related expenses incurred during the marriage. Other cases concerning workers’ comp or disability benefits have followed suit, using the “analytical method” to separate out what represents marital income and what is future income.

By way of analogy, to the extent an employment dispute settlement package compensates for post-marital lost wages, such settlement is not subject to division even if the settlement itself occurred during the marriage.

However, if a settlement is pending or awarded during the marriage, it could be considered marital income or a marital asset. For example, if a spouse has an unliquidated workers’ compensation claim pending on the date of dissolution, The Court of Appeals has ruled that a trial court may reserve jurisdiction to apportion the marital interest “upon receipt of the award.”

CONCLUSION

Under current case law, a final or pending employment settlement, similar to a workers’ comp award that is pending or has been issued, should be viewed under the “analytical approach” that allocates any proceeds meant to compensate for future lost earnings to the earning spouse, and thus allocate the settlement to the employee. It should be noted, of course, that the earner’s future wage replacement could be considered by a court in determining his ability to pay maintenance and/or child support.

 

“Family Law Q+A” is meant to entertain and generally inform readers about interesting issues in Colorado family law.  Nothing in this blog post represents legal advice or creates an attorney-client relationship.  The views here do not represent the formal legal opinions of Carrigan Law, LLC.  Furthermore, the law is constantly changing, so any particular discussion of a legal issue may presently be outdated or erroneous.  Readers are directed to contact a Colorado family law attorney regarding the specifics of any case.