What Is a Property Settlement Agreement, and How Can I Make Sure I Negotiate a Fair One?
Recently, a client of mine had thought her divorce was finalized—until several weeks later when she got a nasty surprise. After she had signed a property settlement agreement and the court had entered the divorce decree, her bank account was garnished for almost $5,000!
It turns out her now ex-husband had failed to disclose income for a previous tax year, and the state taxing authority was now coming after her for the liability. To add insult to injury, her ex did not disclose this debt during the negotiation process. Luckily, we were able to get back into court and obtain an order requiring her ex to reimburse my client for the garnished amount.
My client’s situation highlights the importance of the process of drafting a detailed, comprehensive property settlement agreement. But first, you need to know what these agreements are and how to make sure you draft a fair one.
What Is a Property Settlement Agreement?
Property settlement agreements are separation agreements negotiated between spouses and executed before a divorce is final. Once they are signed, courts are mandated to follow what is in these contracts; that means a judge cannot change the terms. Moreover, they are extremely difficult to overturn.
Five Tips for Negotiating a Fair Property Settlement Agreement
1. Know what you and your spouse own and owe. In a divorce, parties have access to formal fact-finding tools known as discovery: each party can ask the other to answer questions under oath and request that the other produce documents. My client that I described above was able to go back into court because her ex had failed to disclose the pre-existing tax debt during the discovery process. Use the tools that the law gives you to get a full picture of your spouse’s financial information.
2. Don’t rely on Zillow or tax-assessed values for your home. If there’s a home involved, get it appraised early on, especially if you’ve agreed that your spouse will receive it for a payout. Tax-assessed values are typically lower than the actual market value, while Zillow can be inaccurate as well.
3. If you are the lower-earning spouse and want possession of the home, meet with a loan officer and see whether you qualify for a refinance or a qualified assumption before signing a property settlement agreement. One big issue that lower-earning spouses frequently encounter is how they can buy out the interest of their soon to be ex.
4.Don’t forget about retirement accounts. If you don’t include language regarding retirement funds in the property settlement agreement, you’ll lose your right to them. Moreover, a separate order apart from the property settlement agreement and final decree will be needed to divide retirement accounts and 401(k)s.
5. Hire a competent family law attorney. The law regarding the division of marital assets and debts is complicated, so don’t try to take it on alone.
To find out more about property settlement agreements or about any aspect of divorce, please call me at (804) 320-6600 or email me at email@example.com.
This post is provided as an educational service and should not be construed as legal advice. Readers in need of assistance with a legal matter should retain the services of competent counsel.