Chapter 13 Getting It in Writing: Preparing Your Marital Settlement Agreement

• Library: Nolo's Essential Guide to Divorce (Nolo) (2020 Ed.)

CHAPTER 13 Getting It in Writing: Preparing Your Marital Settlement Agreement

What It Is, What It Does

Creating the Agreement

Negotiations

Housing

Expenses and Support Payments

Parenting

Personal Belongings

Cars

Bank and Other Accounts

Miscellaneous Assets

Debts

Retirement Benefits

Taxes

Life and Disability Insurance

Health Insurance

Name Changes

Dispute Resolution

"Boilerplate" Provisions

Doing the Math

Consulting a Lawyer

Completing the Paperwork

Up to this point, the term marital settlement agreement may have seemed abstract. You know you need one, but why is it important? And where will it come from? If you've already worked out some issues with your spouse, or even just begun discussing them, then you're making progress toward your final agreement. This chapter will answer those questions and outline the issues that you must be sure to address in your agreement. And, to show you what the final product might look like, there's a sample agreement at the end of the chapter.

Even if you think your divorce will end up in a trial, you should still try to come up with an agreement on at least some of the issues, and not leave every decision to the judge. And keep in mind that most contested divorces end up settling out of court—frequently at the last minute. Any work you do negotiating a settlement agreement won't be wasted.

The only times you don't need a settlement agreement are when you're getting a summary divorce, or when your state's forms give you room to include your agreements.

What It Is, What It Does

A marital settlement agreement (sometimes shortened to "MSA") is the document that spells out everything you and your spouse agree to regarding property, custody, and support. It describes:

• how you intend to divide your property and debts
• your agreements about child and spousal support
• how you will share parenting responsibilities, and how you will deal with any issues that come up relating to raising your children, and
• how you will deal with any conflicts that arise later.

Commonly, these agreements contain a lot of detail. For example, yours might set out whether support will be paid by check or by automatic transfer and how you'll choose the real estate agent who will list your house.

Once you've finalized your MSA, you submit it to the judge, who approves it and makes it part of your final divorce order. Because the agreement has the force of a court order, both parties are likely to comply with its terms, which gives everyone some degree of confidence about the future.

Creating the Agreement

To create a marital settlement agreement, you and your spouse must make hard decisions about your property and your children. There are many issues to consider and negotiate. To make sure that your agreement addresses everything it should, refer to the checklist below. You may not need to include every single item in the agreement itself—for example, if neither of you changed your name when you married, you need not include a section about returning to your old name. But you should touch on all of them in the negotiations, if only for the purpose of confirming they don't apply to you.

When you've covered everything, your agreements must be put in a final document. If you use mediation or hire a lawyer, then the mediator or lawyer will likely prepare the settlement agreement for you. Or you may want to start with a free template from the Internet, and use it along with books and other Internet research to create a draft agreement, which you then have reviewed by lawyers. Another option is to pay an Internet business to gather information from you and then prepare an agreement for you, or pay a legal document preparer (if this service is available in your state) to do the same thing. Chapter 16 has details about each of these options.

Most of these issues are included in the sample agreement at the end of the chapter.

Negotiations

Negotiating with your spouse and putting together an agreement will take time, so be patient and put the priority on doing it right, not doing it quickly. This section addresses each issue that you'll need to include in your agreement.

At the end of this chapter, there's a sample MSA for a fictional couple, Cynthia and Howard. Their divorce isn't the very simplest divorce—or the most complex—a couple could possibly have. Their negotiation process is described throughout the chapter, to give you an example of how the issues in a negotiation work together and how the process works.

Cynthia and Howard's Story
Cynthia, a nurse administrator at a nonprofit agency, and Howard, a civil engineer, lived in a house they bought with savings and some help from both sets of parents. Both of them had secure jobs with benefits. They had two daughters, Sarah and Maya, ages seven and nine. After each girl was born, Cynthia took six months off and then worked half time, increasing her hours to 30 per week when Maya started kindergarten. Howard worked a fairly predictable 9-to-5 day when he was in town, but his job required frequent travel. His absences were one factor in the growing emotional distance between them, and after almost 11 years of marriage, they separated.
After the initial shock of the decision wore off, Cynthia and Howard were able to agree that they wanted to divorce as amicably as possible for the sake of the children. They also agreed that they'd try to do the divorce themselves instead of hiring lawyers—they figured they would save money and Cynthia was good at doing research and paperwork. She went to the bookstore and purchased a couple of divorce guides, and did some Internet research to get started. Their marriage counselor agreed to act as a mediator and help them to make decisions about their kids and their property.

What Your MSA Should Cover

□ Child support
□ Spousal support
□ Health, life, and disability insurance
□ The house and other real estate
□ Cars and other vehicles
□ Household items (furniture and furnishings)
□ Personal items, including clothing, jewelry, tools, and athletic equipment
□ Stocks, bonds, and mutual funds
□ Bank accounts
□ Retirement plans and pensions
□ Family business or professional practice, including accounts payable and receivable
□ Pets
□ Artwork
□ Frequent flyer miles, season tickets, and other miscellaneous assets □ Stock options
□ Parenting (separate parenting agreement should accompany MSA)
□ Name changes (you, your spouse, or the children)
□ Credit cards and other debts
□ Tax payments and distribution of refund
□ Fees for mediation, lawyers, and counselors
□ Social Security benefits
□ Modifying the agreement later
□ How disputes will be resolved
□ Which state's law will govern in the event of a dispute

Housing

One of the first decisions you'll need to make is where each of you will live and what will happen with the house if you own one. Chapter 10 deals with this question in detail. Whatever you decide, make sure that your MSA is specific about the timing of the various changes. For example, if you're both still living in the house, the agreement should include a date that one of you is going to move out. If you're transferring it, set a date that the paperwork will be signed. If the person staying is getting a loan to buy the other person out, put a time limit on getting the financing in place. The dates need to be realistic—don't leave only two weeks for getting a new mortgage if you haven't even begun looking.

Parents often make agreements about continuing to live in a certain proximity to their children or not to move out of the area or out of state for a specified period of time. If you both have stable work situations and can afford to live in the same area, this is a great way to avoid future conflicts over one parent's desire to move away.

By the time Cynthia and Howard separated, the balance on their 15-year mortgage was $145,000, with a monthly payment of $1,100. They estimated the house was worth about $295,000, and that their equity was approximately $150,000. The house was in a nice neighborhood, an easy commute for Cynthia and a slightly longer one for Howard.
Howard and Cynthia were both very attached to their house. They had worked hard on landscaping the yard, building a deck, and gradually perfecting the interior. Cynthia wanted to stay there with the kids and have Howard move out. He was reluctant, but finally agreed. He found an apartment in a fourplex about half a mile away. It wasn't cheap, but they agreed it was important for him to stay close so that the girls could easily go back and forth.
The more difficult question was what would happen to the house in the long run. At first, Howard was adamant that he didn't want to sell the house—either to a third party or to Cynthia in a buyout. He had put too much work into it and cared about it too much. He also thought it was going to appreciate even more, and he didn't want to miss out on that. He argued that they should continue to co-own the house for another five years and then assess their situation, and he was willing to stay in rental housing during that period if that's what it would take. But he wasn't sure that would be necessary—because the loan on the house wasn't enormous, and he had a good salary without a lot of other debt, he might be able to qualify for a loan on another small place.
Cynthia, who was inclined to make a clean break, wasn't sure about joint ownership. She knew she didn't have a choice about continuing to parent with Howard, but she didn't want to have to continue making decisions with him about financial matters. She also disagreed about the real estate market, believing the house's value wasn't going to increase much. She did want to stay in the house, though, so her position was that Howard should allow her to buy him out of his interest. On the other hand, she was worried that she wouldn't be able to afford a buyout—she'd have to take a larger loan to cover the buyout payment to Howard. She wasn't sure she'd

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