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Disability Payments and Divorce in Arizona

Posted on : May 2, 2016, By:  Christopher Hildebrand
Disability Insurance and Divorce in Arizona.

Disability Payments and Divorce in Arizona

In Arizona, all money received by one spouse during marriage – other than that received as a gift or by inheritance – is presumed to belong to both spouses as community property. However, special rules apply when the money is a recovery under a disability insurance policy. In the recent case of Hatcher v. Hatcher, 933 P.2d 1222 (Ariz. Ct. App. 1996), the Arizona Court of Appeals discussed whether disability payments made to one spouse during the marriage are community property or the sole property of the injured spouse.

Facts of the Case: Hatcher v. Hatcher

Disability Payments and Divorce in Arizona.

Disability Payments and Divorce in Arizona.

Marvin and Julia Hatcher were married in 1980. Marvin signed up for an insurance program offered by his employer that provided compensation in case of accidental death, dismemberment or disability. The premiums were deducted from his wages. In 1984, when Marvin lost his right hand and part of his right arm in a work-related accident. He received a small worker’s compensation award, as well as a recovery under the insurance policy: a payment of $120,000, plus monthly payments for 54 months. The couple used part of the lump sum payment to buy a family residence, with Marvin and Julia taking the title as joint tenants.

They used the monthly payments to pay off the rest of the money owed on the house. They also used some of the insurance settlement to build an apartment complex on land Marvin owned before marriage. Marvin and Julia also took title to the apartments as joint tenants. Julia filed for divorce in 1991. At trial, the court found that the insurance settlement proceeds were Marvin’s separate property and that all of the real property belonged solely to Marvin. Julia appealed.

Jennifer, thank you for being my attorney. I could not have been more pleased with the outcome of my family court hearing. Everything you have done for me throughout this case reflects in the final ruling of the judge. You helped me keep my head together and taught me a lot about myself as a person. I learned so much about my life from observing and listening to you. I will take all the advice you gave me to continue taking responsibility for my choices, continue to put the kids' needs first, and always stay truthful. Your diligence, dedication, and persistence in my case made what seemed impossible, possible. You are a wonderful person and an amazing attorney and I am stronger and more confident because of you.
A Google User
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20:31 20 Sep 17
I just want to again thank the Firm for working with me all that it has. I could not have done anything without everyone's assistance. You, Chris and Stacey have been and continue to provide me with compassion and hard work towards my case. Also a very special thanks to Kip for taking my case in the beginning. Also continued support from him and his dedication to providing me with his expertise in this matter.
A Google User
A Google User
21:41 07 Nov 17
After interviewing several law firms, I came across Jennifer Shick, and her firm, who I hired to represent me for my Family Court case. Jennifer has extensive knowledge of the law and is determined to bring the truth to every issue involved within the case. Throughout my case, Jennifer was prepared meticulously as well as went above and beyond all of my expectations. Even when the other party tried to differ from the truth, lie to the Judge, and turn situations around, Jennifer remained attentive and provided substantial evidence to show the judge the facts as well as the proof to support what was the best interests of my children. Additionally, Jennifer helped me endure many difficult experiences, situations and inspired me to remain positive throughout the entirety of my case. Her kindness, compassion, and professionalism helped me through very difficult times and made the process feel a thousand times lighter on my shoulders. She truly has my children and my best interest at heart and I trust her perspective as well as her honesty on each and every aspect of my case. She lessened the burden on my shoulders and even when I felt like the case was not going to go in my favor, Jennifer was open-minded and reassured me that the Judge would, in fact, see the truth, which he did and the case went in my favor. After nine months of court, everything finally came together. I cannot declare how much Jennifer has been an outstanding attorney. She addressed each and every issue with diligence, she cares about her clients and their families. Jennifer genuinely cares about her clients and her dedication to the details of the case was remarkable. Overall, I am extremely pleased with Jennifer’s services and I am truly thankful that I was so blessed to have her represent my children and me. I highly recommend Jennifer as one of the best attorneys in Arizona and if the situation ever arises, I will definitely have her represent my children and me again.
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14:58 04 Oct 17
Dear Stacey and Kip, How can I ever thank you enough for helping me through the most difficult time in my life? I couldn't put into words my heartfelt gratefulness. You both were so compassionate and professional at every given moment throughout this process with me. I thank you from the bottom of my heart. You helped me to regain my freedom.
A Google User
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16:03 22 Nov 17
I was a client of Attorney Kevin Park for the dissolution of a divorce in 2016. And since I had never had the need to hire an attorney before for any purpose, I was somewhat apprehensive of the process. But the very calm and professional demeanor of Mr. Park eased my fears. He adeptly answered all my questions and I clearly knew the process and what to expect. And the skilled manner he communicated with opposing counsel was perfect. When it came down to negotiating with my spouse’s counsel, I knew I had selected the best attorney for my situation. What I noticed and appreciated was that he was using just the right amount of pressure with opposing counsel as was necessary. If you find yourself in this situation, you will want a seasoned professional like Mr. Park on your side. I'm very grateful that he was my attorney and not the opposition!
A Google User
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22:14 28 Jun 17
Chris is a smart and aggressive attorney for his clients. Chris always tries to reach a fair settlement of his cases. I’ve represented clients when Chris was the opposing counsel and while he is professional and amicable to work with, he does not back off on what he needs to do for his client
A Google User
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18:16 18 Sep 17
Kevin Park of Arizona Estate Planning Attorneys was just what I needed for my divorce. He was very approachable and personable. He was quick to recognize what I needed and provided it quickly and efficiently. I hope to never need a divorce lawyer again, but if I know anyone else who does, I will definitely recommend Kevin.
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19:22 23 Aug 17
I feel that Tracey Van Wickler is certainly one of the best family lawyers around. She is logical, intelligent, and truly cares. Tracey always does what is in the clients best interest, does it well, timely and with integrity. She is good at keeping her clients informed as to what is going on and clear in her communication both written and verbally. I have recommended Tracey to other people and will continue to recommend her. I recommended Tracey to someone who was having issues with their ex-wife and his response was, “I know how good she is because I went up against her and she ate me for lunch”. This same person was so impressed with her, he even recommended her to someone else, WOW, that is impressive! I am exceptionally happy with her attention to detail, her ability to explain things in ways that are easy to understand, as well as her ability to keep everyone focused on the most important things. I would recommend Tracey to anyone who may be in need of her services.
A Google User
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17:44 23 Jun 16
I retained Hildebrand Law after interview a number of firms in the valley. Working with Michael C. was incredibly easy and informative. My case progressed in such a organized and thought out way to ensure that my needs were met. Michael was incredibly proactive and was able to see far ahead into my case to steer clear of some roadblocks. I would not hesitate to recommend Michael Clancy, and Hildebrand Law in general, to anyone.
Bassam Ziadeh
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21:20 02 Apr 18
I have worked with Hildebrand law for about 8 years. They are always ready to serve, provide guidance and give you a few options. When they provide you options they also take the time to walk you through the pros and cons of each and give you a recommendation of what is best, but will listen to you and support whatever course you choose after making and educated choice. I’d recommend them to my closest friends and feel Chris Hildebrand is now a friend to me.
Larry Flint
Larry Flint
21:53 27 Feb 18
Despite the unfortunate situation I found myself in, Chris Hildebrand @ Hildebrand Law helped me maneuver every step with professionalism, expertise, and even a sensitivity that was an added bonus.Chris and his staff helped me even when I didn't know I needed the help. In other words. . . they made sure we did not leave anything undone. And in the rare instance we needed the expertise of another professional, Chris knew exactly who to recommend.Chris also knew, because of his experience, what to anticipate down the road of litigation. That meant we were better prepared to meet the challenges head on, which lead to a more equitable and fair outcome. I appreciated that Chris did his best to meet my every need in a timely fashion, even if I had a simple question that required only a phone call or e-mail or if we needed to talk face-to-face.I highly recommend Chris Hildebrand @ Hildebrand Law, PC.
Sam Franchimone
Sam Franchimone
22:09 12 Sep 13

Arguments on Appeal

Julie argued on appeal that the insurance proceeds were Community Property because the premiums were paid with community money. Alternatively, she claimed that – even if the monies were Marvin’s separate property — the fact that the property was held by both of them in joint tenancy created a presumption that Marvin intended to make a gift to her. Marvin argued that all of the insurance proceeds were intended to compensate him for his injuries and, therefore, were his separate property.

Arizona Divorce Law on Personal Injury/Disability Recoveries

The Court of Appeals reviewed Arizona case law about how the personal injury or disability recoveries should be treated in an Arizona divorce. In Jurek v. Jurek, 124 Ariz. 596, 606 P.2d 812 (1980), the Arizona Supreme Court ruled that one spouse’s personal injury recovery can include some money that is community property and some that are separate property. Any part of the recovery that compensates the spouses for medical treatment payments or loss of wages during the marriage is community property. On the other hand, any portion of the recovery that is intended to compensate for the injury to a spouse’s personal well-being is that spouse’s separate property.

Subsequent cases held that any part of disability payments that are to compensate the injured spouse for lost wages after a divorce is his separate property. The Court of Appeals noted that no decision focused on how disability benefits received during the marriage should be treated.

Disability Proceeds May Be Partly Community Property

The Court determined that a spouse’s disability insurance compensation can be partly community property. It rejected Julia’s position that the fact that the policy was purchased with community funds was important. Rather, it ruled that — like personal injury recoveries — disability benefits have various parts. The primary intent of disability insurance is to protect against the loss of a spouse’s future earning capacity. During the marriage, a disabled spouse’s reduced earning capacity results in a loss to the community. If the spouses’ divorce, any reduced earning capacity becomes the separate loss of the disabled spouse.

The Court ruled that Marvin’s loss of his arm and hand resulted in both a loss of earnings and a permanent impairment to his future earning ability. Workers’ compensation insurance provided compensation for lost wages. The lump sum disability payment was to compensate for the reduction in Marvin’s future earning capacity. Some of the insurance proceeds compensated the community for his reduced earning capacity during the marriage, which amount was community property. The remainder of the lump sum payment compensated him for future (post-dissolution) lost earning capacity. That portion is husband’s separate property. The Court sent the case back to the trial court to determine what amount of the disability recovery was separate and what part community property. It also orders the trial court to revisit Julia’s claim that, in placing title in joint tenancy with wife, Marvin made a gift of his separate property to her.



 

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