Divorces are not always contentious. When a couple wishes to dissolve its marriage, both parties may reach an agreement as to how they wish to divide their assets. With certain limitations, the parties may also agree to matters such as child custody and visitation.
Why Create A Divorce Settlement Agreement?
Creating a divorce settlement agreement presents several benefits to each party. If a court must resolve factors in dispute, each spouse will usually be entitled to either half of the marital property or enough property to effect an equitable distribution of assets depending upon state law. A court may not divide those assets in the most efficient manner. In addition, litigating a divorce will usually be more expensive than settling the matter, as each party will need his or her own attorney to file motions and come to court on their behalf.
Thus, couples who wish to dissolve their marriage should always attempt to negotiate an agreement whenever it is possible to do so. Spouses who cannot reach a consensus on certain issues should attend mediation hearings even if the court does not order them. Nonbinding mediation will provide each spouse with the proper perspective and help resolve important issues before putting the matter in the hands of the court.
What Must Be Included In The Agreement?
When couples decide to end their marriages, it is common for the individuals involved to agree on some issues but not others. In such circumstances, the spouses may still draft and sign an agreement on as many different issues as they have agreed. This reduces the number of issues to be litigated before the court. It also serves to focus each spouse’s arguments, preventing both parties from conflating issues.
Some courts require the couple to include certain provisions in their agreement if they have children. State law varies on the matter, but generally, the primary parent will be required to carry health insurance for the child and be capable of providing the necessities of life for him or her.
If the court finds that the agreement will not be in the best interests of the child, a court may reject the agreement even though both parties support it. In California, when parents receive public assistance, the agency providing assistance must sign off on the support agreement.
What To Consider When Determining The Settlement
There are many factors to consider when determining the settlement. Parents with children should consider the children’s long-term welfare; both parents must account for educational expenses and rearing costs. Additionally, both parties will wish to maintain their respective standards of living. While this is often impossible, both individuals can divide assets in a manner that befits both of them over the long term.
Assets that are necessary to transact business or are particularly valuable to one person for other reasons should remain with that person. If the couple owns a significant asset like a residence or a business, forcing a sale at an inopportune moment can cause significant personal and financial disruptions in each person’s life. In such cases, the party who wishes to retain the asset should consider buying out the other party’s interest with other assets or money.
The same concept applies to retirement plans like IRAs, 401(k) plans, and pension plans. Couples can divide retirement plans with a Qualified Domestic Relations Order, or QDRO. This document is used to notify the plan administrator to disburse the assets in a certain manner.
Since many couples have sizable amounts of their net worth tied up in retirement plans, a buyout may not always be possible. However, it’s important to realize that interfering with these plans and their respective policies can have significant tax consequences for both payees. Before agreeing to split retirement benefits, speak with a certified public accountant or a tax attorney to discuss any tax liabilities.
How To Create A Divorce Agreement
Couples may produce an agreement with or without legal assistance, but producing an agreement with legal assistance is generally the preferred method. When drafting a settlement, both parties should retain lawyers. This prevents a more sophisticated person from taking advantage of a less sophisticated person.
It also ensures that the agreement complies with all court requirements, and that the agreement addresses all issues, such as alimony, that may arise in the future. Parties who wish to produce a settlement without legal assistance should contact the court. While clerks cannot provide legal advice, most courts offer couples a convenient outline of all filing requirements.