California Family Code § 781: Personal Injury Awards as Separate Property in Divorce

Plain-Language Summary

California Family Code § 781 sets out when money from personal injury settlements or court judgments is treated as the separate property of the injured spouse rather than community property. In general, if the injury happened during the marriage, the default rule (under Section 780) is that any resulting damages are community property to be split in a divorce. Section 781 creates exceptions to that rule: it protects certain personal injury awards so that they belong solely to the injured spouse.

In plain terms, Section 781(a) says that if an injury occurs after the marriage is effectively over or while spouses are living apart, any compensation received belongs only to the injured person. This includes injuries that happen after a divorce or legal separation is finalized, or when the spouses are living separate and apart (even if not yet divorced). Additionally, Section 781(c) ensures that if one spouse has a legal claim against the other (for example, one spouse injures the other), any damages paid to the injured spouse are that spouse’s separate property. Finally, Section 781(b) provides that if the non-injured spouse paid for injury-related expenses (like medical bills) out of community funds or their own funds, they have the right to be reimbursed from the injury award. In summary, § 781 aims to fairly allocate personal injury awards by recognizing when those funds should be treated as the individual property of the injured spouse and by reimbursing a spouse who contributed to the costs of the injury.

Real-World Examples

Accident After Separation: Alice and Bob separate, and a month later Alice is in a car accident. She eventually receives a settlement for her injuries. Under § 781(a)(2), because the cause of action (the accident) arose while Alice and Bob were living separate from each other, the settlement is Alice’s separate property. Bob would not be entitled to any share of that money in the divorce. If Bob had paid any of Alice’s medical bills from his own savings or from a joint account, he could claim reimbursement of those costs from the settlement under § 781(b).
Injury After Divorce Finalized: Tom and Maria’s marriage is dissolved by a final divorce judgment in January. In March, Tom is injured at work and wins a personal injury lawsuit. Because the injury occurred after the divorce was final (§ 781(a)(1)), the entire award is Tom’s separate property. Maria has no claim to any portion of that money, since they were no longer married when the cause of action arose.
One Spouse Injures the Other: During their marriage, John accidentally causes serious injury to Jane through negligent driving. Jane sues John for personal injury. Even though this happened while they were married, § 781(c) specifies that any damages John pays (or his insurer pays on his behalf) to Jane for her injuries are Jane’s separate property. In other words, money paid from one spouse to the other for a marital tort is not treated as community property – it belongs entirely to the injured spouse (Jane). John also would not have any claim to that money, and it wouldn’t be split in the property division.
Using Community Funds for Injury Expenses: While still married, Linda is injured in an accident and the couple uses $10,000 from their joint savings to cover her medical bills. Later, after they separate, Linda’s lawsuit results in a $50,000 settlement. Because the injury happened during marriage, normally that settlement could be community property – but here the cause of action actually arose while they were living apart (assume they were separated when the injury occurred), so § 781(a) makes it Linda’s separate property. However, under § 781(b), Linda must reimburse the community for the $10,000 spent on her treatment. In practice, this means $10,000 from her settlement would be paid back or accounted for so that her ex-husband is compensated for the community funds that went toward her injury expenses. The remainder of the settlement is Linda’s separate property.

Published Case Law on § 781

In re Marriage of Mason (1979) 93 Cal.App.3d 215 – One of the earliest cases applying these principles. Here, the husband received a large personal injury award during the marriage. The Court of Appeal upheld a division of property on divorce that gave the injured husband the bulk of the assets traceable to his injury compensation. This case recognized that personal injury damages (though community property when received during marriage) are subject to special handling at divorce, often allocated predominantly to the injured spouse (similar to what is now codified in § 781 and related provisions).
In re Marriage of Devlin (1982) 138 Cal.App.3d 804 – In this case, the husband had been seriously injured during the marriage and received personal injury damages. Upon divorce, the trial court awarded most of the couple’s community property (which was derived from that injury settlement) to the husband. The wife appealed, but the Court of Appeal affirmed the decision. The ruling explained that, under the law (then Civil Code § 4800(c), the precursor to Family Code §§ 780–781), personal injury recoveries are “community property” during marriage but are to be assigned to the injured spouse at divorce except in unusual circumstances. Devlin confirmed that a court may award more than half (in fact, all, in this instance) of the injury-related assets to the injured spouse, without requiring an equal division, as long as the injured spouse gets at least 50%. This case illustrates the policy later embodied in § 781 — treating injury awards like the injured party’s separate property upon dissolution.
In re Marriage of Morris (1983) 139 Cal.App.3d 823 – This appellate decision involved a wife who had received about $42,000 from a personal injury settlement during the marriage. In the divorce, the trial court awarded the entire settlement amount to the wife and divided the rest of the community property equally. The husband argued that the court should have offset that award by giving him more of the other property (to equalize the division). The Court of Appeal disagreed and upheld the award entirely to the wife. The opinion made clear that the law (former Civil Code § 4800(c), now reflected in § 781 and § 2603) allows personal injury damages to be treated essentially as the injured spouse’s separate property at divorce. The equal division rule does not apply to those damages – the injured spouse can receive 100% of the settlement without any “offset” to the other spouse, so long as the statutory minimum of one-half to the injured party is met. Morris confirmed that giving the injured spouse the entire recovery is permissible and consistent with legislative intent.
In re Marriage of Klug (2005) 130 Cal.App.4th 1389 – This more recent case dealt directly with the timing aspect codified in § 781(a). In Klug, the wife had filed a legal malpractice lawsuit (considered a personal injury/tort claim) against an attorney after the spouses had separated. She settled that lawsuit and received money after the marriage had ended. The husband claimed that settlement was a community asset. The Court of Appeal held that the malpractice cause of action “arose” after separation, meaning the settlement was the wife’s separate property under the exception now found in § 781(a)(2) (injury cause of action arising while living separate from spouse). The court emphasized that whether a tort recovery is separate or community property depends on when the underlying cause of action arose. Because the wrongful acts and resulting harm happened when the parties were no longer together, the recovery did not belong to the community. Klug illustrates how courts apply § 781 to characterize post-separation injury claims as the separate property of the injured spouse.

Full Text of California Family Code § 781

(a) Money or other property received or to be received by a married person in satisfaction of a judgment for damages for personal injuries, or pursuant to an agreement for the settlement or compromise of a claim for those damages, is the separate property of the injured person if the cause of action for the damages arose as follows:

(1) After the entry of a judgment of dissolution of a marriage or legal separation of the parties.
(2) While the injured spouse is living separate from the other spouse.

(b) Notwithstanding subdivision (a), if the spouse of the injured person has paid expenses by reason of the personal injuries from separate property or from the community property, the spouse is entitled to reimbursement of the separate property or the community property for those expenses from the separate property received by the injured person under subdivision (a).

(c) Notwithstanding subdivision (a), if one spouse has a cause of action against the other spouse that arose during the marriage of the parties, money or property paid or to be paid by or on behalf of a party to the party’s spouse of that marriage in satisfaction of a judgment for damages for personal injuries to that spouse, or pursuant to an agreement for the settlement or compromise of a claim for the damages, is the separate property of the injured spouse.

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