Thursday, June 28, 2012

Top 10 mistakes in Postnuptial/Marital Settlement Agreements

1. So-called “boilerplate language” is there for a reason.  Review and edit it as necessary.

Boilerplate language is typically standard language or paragraphs that are found in most, if not all, agreements of a particular type.  For example, boilerplate language may address what should happen if certain circumstances arise or where the proper jurisdiction is for any future litigation.  The boilerplate language also could provide certain disclosures that are necessary under the law.  Even though this language may seem to be irrelevant at the time of entering into the agreement, it adds an extra layer of protection if future problems arise.  Sometimes the presence of the language can make the difference betweem whether the agreement is valid or void.

2. Number the pages of the document and have the parties initial each page.

By numbering and initialing each page of the document, it greatly decreases an individual’s ability to contest the accuracy of the document in the future.  If each page is initialed, it is much harder, for example, for someone to argue that a page was taken out or inserted after the document was signed.

3. Include real deadlines for respective tasks and consequences for failing to meet those deadlines.

Specific deadlines can eliminate headaches.  After going through all of the trouble of negotiating an agreement, there is nothing worse than a resolution being delayed because one person is taking his or her time signing a crucial document or paying money.  By setting a deadline and consequences for missing those deadlines, you can avoid these problems.

4. Place custody and/or support terms in a separate stipulation and order that will be filed with the court so that these agreements can be enforced.

It is much easier to enforce a custody or support stipulation that is separate from a global divorce resolution.  Even though it seems easier to have everything in one agreement, it is easier for the courts to interpret, review and enforce custody and support agreements that are separate documents.

5. Agreements outside of the Property Settlement Agreement will not be honored.

In short, if you want a specific term of your agreement to be enforceable, you must make sure that the term is in writing in your Property Settlement Agreement.  Simply because you believe that you and your spouse agreed to something during negotiations does not mean that it is enforceable, unless the term makes it into the final, signed version of the agreement.

6. Do not use unclear or ambiguous language.  Someone who knows nothing about you or your case should understand the clear intent of the document.

The easier the document is to read and understand without have to talk to you, your spouse or one of your attorneys, the better.  Anyone should be able to pick up the document and understand what is supposed to be accomplished with the agreement.  No one should have to ask for more background information or an explanation of the facts.

7. Remember to include indemnifications for debt or Internal Revenue Service liabilities.

At the time that you are executing a settlement agreement, you may not even be considering future or past debts or obligations, especially if you have never had or do not know about problems at the time of entering into the agreement.  By making sure that standard indemnifications are in the agreement, you can protect yourself from problems that may arise.  On the other hand, if you know that problems exists, then these provisions are even more important to include and tailor to your specific situation.

8. Refinance debt out of joint names.

When your divorce is finalized, you do not want to jointly own or be liable for anything together with your spouse, if at all possible.  Pay off debt or have one party re-finance it into his or her own name.

9. Tie-up all loose ends, such as the arrangements for filing the tax return, splitting the refund or paying outstanding bills.

The more loose ends that you resolve prior to finalizing the divorce, the better off you will be.  Not only is it practically easier to deal with all of these issues as part of your settlement negotiations, but it also is emotionally and financially easier to try to resolve everything prior to resolving the divorce.  Again, at the end of the divorce, you want to be able to move forward without being entangled with your spouse or having to continue to negotiate lingering issues with him or her.

10. Never negotiate and/or waive rights to something that is enforceable (equitable distribution) for something that is subject to change (child support).

Child support is always modifiable.  No matter how many agreements or promises you make with your spouse, either party can petition the court to modify child support based on a change in circumstances.  However, you cannot go back and change a decision that you made when negotiating the equitable distribution.  For example, suppose you and your spouse agreed that he could keep all of his retirement funds, if he paid you X dollars a month in child support.  Then two years after you entered into the agreement, your spouse loses his job and gets a new job making half as much money.  Your spouse could petition for and likely be granted a reduced child support obligation, yet he still would be able to retain all of his retirement benefits.  Avoid this pitfall.

Written by Elizabeth A. Bokermann, Esquire and Linda A. Kerns, Esquire, attorneys at the Law Offices of Linda A. Kerns, LLC.


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Joan Price said...

Great article! However would you be able to use a company that would buy settlements or is that strategy only used when seeking settlement for a injury?