Needs versus needs: divorce and personal injury awards

Regardless of how it happens, a serious injury can produce a number of life changing consequences.

Nevertheless, it doesn’t mean that individuals affected cannot go on to lead full and rewarding lives.

However, great care must still be exercised to make sure that money received following a successful Personal Injury (PI) or Clinical Negligence claim can continue to meet their needs.

That is arguably especially true in respect of divorce, when someone’s clinical needs can conflict with the ongoing financial needs of a former spouse.

Family lawyers are at pains to achieve a suitable balance which provides an adequate arrangement for husbands and wives who find themselves in just such a situation.

It is true, though, that the courts do not necessarily regard a Personal Injury payout as being off-limits when it comes to determining the nature of a divorce settlement.

Data published by the Ministry of Justice (MoJ) in June show that 81,481 new Personal Injury claims were made during the course of 2022.

When a claim is adjudged to merit a settlement, payouts have a number of different constituent elements. As well as a general damages award for pain and suffering, figures can also be included to take account of loss of earnings  and someone’s future treatment.

If a brain injury which prompted such legal action is found to have impeded mental capacity to the extent that they can no longer manage their own property or financial affairs, a deputy can be appointed to act on his or her behalf. To give you some idea as to how frequent this, 8,948 deputy applications were  made in the first three months of this calendar year. One-third (34 per cent) related to appointments of deputies to take charge of someone’s property and financial affairs.

I should point out that someone considered to lack capacity to look after their own finances can still take decisions about other aspects of their lives, such as whether to marry.

From our own experience of such relationships, a Personal Injury settlement is often used as a joint marital resource.

The result is that if a marriage subsequently breaks down, it can be difficult to convince a court that the money should be reserved exclusively for the recipient’s essential medical needs and not divided up by the spouses who are going their separate ways in the same manner as their other assets.

When Personal Injury settlements are initially made, it has been customary to place them in a PI trust. They allow beneficiaries to also claim benefits such as  council tax support and local authority care.

Even so, they do not prevent payouts from being factored into the process of asset division on divorce.

The practical virtues of a PI trust, however, can be reinforced with a marital contract.

Both pre- and post-nuptial agreements have become increasingly popular since a Supreme Court decision in 2010. Although they are still be to be given full  legal weight, if they are drawn up properly – with, for instance, full disclosure of  assets and both parties having independent legal advice – they can be incredibly  persuasive in establishing the shape of a divorce settlement.

Whereas someone’s medical needs are integral to the calculation of a PI payout, there is a common principle in divorce that “needs trumps all”.

What that means in this instance is that a PI settlement cannot be protected at the expense of the immediate financial requirements of a spouse whose marriage has broken down.

Faced with that reality, putting a pre- or post-nup in place where a PI award has been made either before or during a marriage can be particularly helpful in ensuring that those sums achieve exactly what they were intended to.

Early advice from specialist trust and family lawyers is advisable to put in place  satisfactory solutions, even for the strongest of marriages. Divorce rates are sadly increasing, and unfortunately life changing events contribute to relationships falling apart.

This joint article has been authored by Paul Gotch of Private Client Solicitors and Rachel Darrell from Hall Brown Family Law.

For specialist personal injury trust advice, please contact Paul Gotch paul@privateclientsolicitors.co.uk.

For expert family law advice, please contact Rachel Darrell rachel.darrell@hallbrown.co.uk.