Personal Injury Structured Settlements: Are They “Property” or “Income” Upon Divorce?
In a recent family case called Hunks v. Hunks, the court considered whether structured settlements – such as the type that are reached as part of a personal injury claim – are considered “property” or else “income” for the purposes of the property-division and equalization regime under the Ontario Family Law Act (the “FLA”).
In that case, Donna and Gary got married in 1995. A few months later, Donna suffered an injury at a supermarket that left her disabled. She successfully sued the supermarket, and was awarded more than $500,000 in compensation. After using spending about $200,000 for family-related needs, she used the rest to purchase a structured settlement (which is a mechanism by which a personal injury victim such as Donna could receive her settlement funds on a fixed schedule, rather than all up-front).
That structured settlement was arranged so that she would receive $1,290 per month for the rest of her life, as well as a lump-sum payment of $15,000 every five years (to a maximum of four such payments). All of this was subject to a small annual increase.
Unfortunately, the marriage between Donna and Gary did not flourish, and they separated about 15 years after Donna’s accident. In the course of settling out their financial affairs through the customary equalization process mandated by the FLA, the issue arose as to how the structured settlement should be properly characterized.
A lower court found that conceptually, a structured settlement was similar to a “pension” and rather than be excluded it formed part of Donna’s matrimonial property that was subject to equalization.
However, the Court of Appeal later overturned that ruling. That court found that the structured settlement was essentially a special type of annuity, and it was more analogous to disability benefits. Under Ontario law, such benefits are considered “income” for FLA purposes, and while not subject to the equalization process per se, they are considered in determining spousal support levels.
For the full text of the decision, see:
Hunks v. Hunks, 2017 ONCA 247 (CanLII)