In a recent case, the Massachusetts Appeals Court considered whether a workers’ compensation settlement constituted marital property in a divorce. During a divorce, the court divides the property of the spouses’ in an equitable manner. Simply, equitable means fair — but not necessarily equal. The court looks at many different factors in considering how to divide the property fairly. These factors include the length of the marriage, and the amounts and sources of income. These factors also include, among others, liabilities and the needs of each of the parties.
What is Marital Property?
Marital property is all property the spouses acquire during the marriage. This is true regardless of which spouse bought the property. This is also true regardless of the name on a title document. Marital property is subject to equitable distribution. Property a spouse acquires before the marriage is separate property. The court can also divide separate property, but it will usually award separate property to the original owner. In determining how to divide property, the court will also consider terms set forth in a valid prenuptial agreement, if there is one, as it may determine who gets what in the divorce.
Aside from the obvious, such as real estate, personal property, and bank accounts, the court may consider many other types of assets to be part of the marital pot. Property in a divorce could be any of the following: houses and real estate, cars, furniture, art, jewelry, bonds, boats, policies, plans, pensions, stock options, accounts, coins or other collections, and more.
Warnajtys v. Warnajtys
Background
In the case, Warnajtys v. Warnajtys, the husband filed for divorce after approximately eight years of marriage. The spouses had one daughter at the time of divorce. After filing for divorce but before the divorce judgment became final, the husband received a workers’ compensation lump-sum settlement of $240,000 for a workplace accident. The accident occurred during the marriage. Of that settlement, the trial judge ordered that the wife receive $50,000.
In making this order, the judge weighed certain factors. The judge considered the husband’s health and employment history prior to the injury. The judge also considered the wife’s income and employment history, future earning potential, her health, and the fact that the wife maintained primary physical custody of the child since the parties’ separation. Furthermore, the judge considered the length of the marriage and the fact that the wife was going to buy out the husband’s share in the marital home.
The trial judge also ordered the husband to secure his child support obligation with a life insurance policy.
When the trial court’s judgment entered, the husband had an application for Social Security disability insurance (“SSDI”) pending. A few months later, the husband began receiving those payments.
On Appeal
The husband appealed the trial court’s judgment. He argued that the trial judge erred by treating his workers’ compensation settlement as a divisible marital asset. He claimed that awarding the former wife a portion of that settlement was inequitable. The husband further argued that it was improper for the trial judge to require him to maintain a life insurance policy as security for his child support obligation.
Appeals Court Holding and Analysis
Workers’ Compensation Settlement
On appeal, the court first explained the workers’ compensation settlement constituted marital property. The reason being that the accident — which formed the basis for the workers’ compensation settlement — occurred while the parties were married and the husband received the settlement before the divorce became final. Citing a prior case, the Appeals Court noted that the workers’ compensation claim is an “‘unliquidated claim for money damages.'” The trial court accordingly has the power to divide this claim. Continuing to cite the prior case, the Appeals Court stated, “‘[A]ll personal property, tangible and intangible, in which a spouse acquires an interest is includable [as property to be divided by the court].'”
The court also held that there was no error in the trial judge’s determination to allocate a portion of the workers’ compensation to the wife. The Appeals Court stated the trial judge has broad discretion in weighing the factors a judge must consider when equitably dividing a marital estate. The trial judge’s equitable division decision will stand as long as the judge: considers all relevant factors determined by law; and, the reasons for the judge’s decision are apparent and flow rationally from the judge’s findings and rulings.
“Here, the judge’s findings were thoughtful and well-reasoned,” the court held. “The $50,000 award to the wife was rationally balanced against her need to buy out the husband’s $105,000 interest in the marital home. There is ample evidence that the judge considered the equities in light of the parties’ equal contributions to the marriage, their ages, health, and other statutory considerations.”
Life Insurance Policy
Regarding the life insurance policy, the husband argued that ordering him to purchase the policy was impermissibly duplicative. The husband reasoned he had an SSDI benefit, which would continue to run until the child’s emancipation. The Appeals Court disagreed, noting it is not unusual for a trial judge to order life insurance policy provisions. “A judge has the authority to order a party in a divorce to secure a life insurance policy for the benefit of a child…and at the time of the trial, the husband’s SSDI application had yet to be approved,” the court noted. “If the husband wishes to modify his obligation to carry life insurance in light of events occurring after the judgment issued, his recourse lies in the trial court.”
The Appeals Court affirmed the trial judge’s decision.
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