Property acquired during a marriage may be be classified as marital or separate depending upon the how the property was acquired. While property accumulated during the marriage is generally presumed to be marital, there are exceptions expressly provided by statute. The exceptions to the presumption of marital status include assets that are traceable to personal injury awards, inheritances, and gifts to one party alone. The burden to trace the assets existing at the time of divorce to separate property falls on the party asserting the separate property claim.
In a recent Clark County, Ohio case, husband asserted that a joint bank account was his separate property. The account contained funds he alleged could be traced to the proceeds of the settlement of his personal injury claim. Husband had been in an auto accident during the course of his employment during the marriage. As a result of the accident, husband received not only compensation from the other driver's insurance company, but also from the Bureau of Workers' Compensation.
The Ohio property division statute, like many other states' statutes, provides that the portions of a personal injury settlement that are recovery of lost wages or reimbursement of expenses paid from marital assets, are marital assets and not separate property. Compensation for pain and suffering is the injured spouse's separate property. An uninjured spouse may have a claim for loss of marital services (consortium), which is the separate property of the uninjured spouse.
The Clark County trial court held that the joint account was entirely marital despite evidence that it had been funded, at least in part, by the settlement and workers' compensation claim proceeds. The trial court and the reviewing court both agreed that husband did not sufficiently trace the proceeds to the various components of the personal injury claim which determine the marital or separate nature of the funds received. In addition the funds had been commingled with martial funds.
In order to preserve the separate nature of personal injury compensation, one should be able to identify the amounts attributable to the components of the claim, such as pain and suffering. When the funds are commingled the burden of tracing becomes much more difficult.