6 Commandments of Separation Agreements

Posted on Sep 8, 2014 by Katie Carter

A separation agreement is a legal contract between a husband and a wife that formally divides all the assets and liabilities of a marriage between the two. These documents are pretty critically important because, of course, they are legal contracts—which means that you really have to take it seriously before you sign.

Keep in mind that a divorce is one of the biggest, most important financial transactions in most adult’s lives these days. That may sound exaggerated, but it’s really not! In a divorce, you divide everything that you earned or accumulated during the marriage, including real estate, bank accounts, investment accounts, 401(k)s, stocks, bonds, mutual funds, and pensions, plus all your personal property, like cars, boats, RVs, dish towels, spatulas, linens, and furniture. Not only that, but your debts will be divvied up, too. Basically, every single thing that you purchased, earned, accumulated, or acquired during your marriage is divisible in your divorce. Since you’re looking at dividing things that will affect you years and years down the line (like retirement), it kind of goes without saying that a separation agreement is a very, very important document. You should take it seriously.

Not everyone who gets divorced gets a separation agreement. Separation agreements are what happens when we have an uncontested divorce. An uncontested divorce is one where the husband and wife agree about how all their assets and liabilities will be divided. Of course, that’s not to say that husband and wife immediately and easily agree about how their assets and liabilities will be divided, it just means that eventually, after negotiation and discussion, they are able to reach an agreement and sign the contract.

What’s the alternative? Well, for couples who can’t agree about how to divide their assets and liabilities, the only real alternative is to go to court and let a judge decide. These days, most couples end up negotiating a separation agreement in the end, no matter how contested the divorce looks like it may be at the beginning. Why? Well, mostly, it’s because going to court and litigating in front of a judge is so expensive—and so unpredictable. It’s hard to know ahead of time what the judge will do in any particular situation (though your attorney probably can make an educated guess, even if she won’t guarantee a result), and it’s hard to be sure that what the judge will do will be advantageous for either of you. It’s not the judge’s job to divide things in a way that is convenient, that makes logical sense, or that preserves your assets. I’ve seen judges tell a people that, if they couldn’t decide how to handle dividing a particular asset that he would just put it up for sale at auction and have them split the proceeds. In most cases, this doesn’t provide either spouse with the best use or the highest monetary value for the asset in question, but it does (in the judge’s view) dispose of it quickly, easily, and fairly, so that no one can say that he was more or less favorable to one side than the other. Besides, to the judge, it’s purely a financial transaction. It’s not a matter of right or wrong; it’s a matter of getting everything divided so that the marriage can be terminated.

So, bottom line: A separation agreement is a great way to resolve your divorce and save money (especially compared to litigating your divorce in court), but you should always keep in mind that it’s an important document that should be entered into carefully.

To help prepare you to plan, draft, and negotiate a separation agreement, I’ve come up with six all important rules, that I’ve dubbed the “commandments” of separation agreements. I’ve written this article to help you keep both your divorce and your future in perspective, and to encourage you to think critically before signing anything that can have such far reaching implications.

1. Your only limitation when it comes to your separation agreement is your own creativity.

That’s right! When you’re negotiating a separation agreement, you should feel to be creative and come up with terms that work for you and your soon to be ex husband. This isn’t really about the law or what the court would normally do. The law (and the court) assumes that you are two mature, rational human beings who are capable of carefully considering the contract you’re about to enter into. As such, the court really won’t step in and overturn anything you’ve agreed to. The sky is the limit here!

If there’s something you want and you’ve got an idea about how to achieve it, talk to your attorney about it! You should feel like your separation agreement is your document, and it reflects all of your concerns. Of course, that doesn’t mean you’ll necessarily get everything you ask for. It is, after all, a negotiation between you and your husband, and, if you both want the same things, you can’t both win. But, still, you should be able to negotiate, prioritize, and structure your agreement so that it suits your goals. You may have to give some things up, but you should feel, all in all, like you got enough to make signing the agreement worthwhile. (Right? Because, otherwise, you’d just go to court.)

Talk to your husband, too, if you’re on speaking terms. Try to play it to your advantage. Does he really want to walk away with the land in Smithfield? Well, give it to him—but not without asking for something you really, really want in exchange.

Bargain, bargain, bargain. Think critically and come up with alternatives that accomplish your goals.

2. Make sure you verify your plans with the necessary experts before you sign.

After you’ve negotiated your separation agreement but before you’ve signed it, you should make sure you have your agreement reviewed by some experts. After all, you’re dealing with some pretty complex stuff, so you should be sure that you know all the possible intended and unintended consequences before it’s too late to turn back.

If you’ve drafted your agreement on your own, you should take it to an attorney to review. If you’re already working with an attorney, you can skip this step. Still, feel free to ask your attorney any questions you may have about how any of the provisions work, or what any of the words in your agreement mean. Be sure that you’ve both read and understand your agreement. You’d be surprised how many people never read it at all.

It’s also a good idea to talk to a CPA, tax attorney, or other financial specialist. Make sure you understand whatever tax related implications your agreement may create. Don’t get a nasty surprise later!

If you’re selling real estate, it’s not a bad idea to talk to a realtor or other specialist, either. If you plan to refinance a piece of property, find out ahead of time whether you even qualify to refinance. If you want to sell, find out how likely the realtor thinks the sale will be, and what kind of purchase price you’re looking at. Make sure that you do all the necessary research ahead of time; don’t wind up being responsible for something that is either impossible or too expensive to be feasible.

3. Only sign once you’re sure you’ve read and understand your agreement.

Once signed, it really can’t ever be un signed later. Like I said before, the court assumes that you’re reasonable, rational, and intelligent enough to negotiate and sign a legal contract. You’re of age, you read the agreement (presumably), and you liked it well enough to sign your name to the bottom of it. As far as the court is concerned, there is nothing for it to do.

Judges don’t like to resolve disputes between people who can do it themselves. If you’ve already resolved the issues, the judge won’t re open them without pretty extraordinary extenuating circumstances. Just because you signed an agreement that you wished you hadn’t, or because the agreement you signed had negative consequences that you didn’t intend at the time you signed the agreement, does not mean that your agreement will be overturned by the court.

Think about it. If the court went around over turning agreements, no one would be safe. We’d all wonder whether our agreement would be next, and we’d be penalized for relying on something we fairly negotiated. We’d probably stop entering into agreements entirely, and litigate everything, just so that we’d know that our result was final, safe, and we could rely upon it. That would undermine our whole system of doing everything, and it wouldn’t help anyone.

For this reason, the court puts the burden on you, as the person signing it, for doing your due diligence and making sure that the agreement is one that you want to sign. If you’re not sure, have it reviewed. But don’t sign it and think it will be possible to overturn later, because chances are very, very good that it’s not possible.

4. Custody, visitation, and child support are always modifiable. Do NOT give up any support or assets in exchange for things that, although important, are always modifiable anyway!

The law in Virginia is that anything relating to the children is modifiable. Why? Well, mostly because the court is concerned about what is in the “best interests of the child,” and what is in a child’s best interest is something that is flexible and changes over time. To adequately safeguard the child’s best interests, custody, visitation, and support are always things that the court will re-visit.

Obviously, it’s in a child’s best interests to receive the maximum amount of child support available by law, so if your salary (or his) changes, support will be modified. It can be modified upwards if you get a raise, or downwards, if you’re laid off. Custody and visitation are modifiable, too, so that whatever is most suitable for the child at any particular time always stays relevant.

It’s important that, while you’re negotiating your separation agreement, you don’t give up anything that you might otherwise have been entitled to receive in exchange for something relating to the children that would be modifiable anyway. If, for example, you ask for custody and, in return, you give up your share of his retirement, he can petition the court for a change of custody later—and you can’t then ask to get your share of his retirement back.

Anything else that the separation agreement settles between you and your husband is NOT modifiable, so you definitely don’t want to put yourself in this position.

5. Always, always, always include specifics like dates and times.

The more specificity, the better! Don’t wind up with an agreement that’s too loosey goosey, or you’ll always be fighting and taking each other back to court. Or, worse still, things just won’t happen and you’ll be stuck in limbo, waiting for him to, for example, put the house on the market. Always establish a date and time for things to happen, even if you don’t think you’ll need to. It’s best for everyone involved if you both know what to expect, and you’re obligated to stick to it. Save yourself time, money, and frustration later—specify exactly what you want your terms to be.

6. Specify a custody and visitation schedule. Don’t just assume that you’ll work it out when issues come up.

The same principle applies for custody and visitation. It’s dangerous to assume that you’ll be able to work it out, especially if while you’re drafting your agreement you’re having trouble agreeing about what to do with custody and visitation.

Take your time and talk it out now, even if you’d rather avoid the fight altogether. It’s much easier and more productive to deal with it now, and set up your agreement with the same expectations. Otherwise, you risk being brought back into court, again and again, to determine things that should have already been determined. Not only that, but you risk an even worse situation: being accused of withholding the child.

Factor 6 of the “best interests of the child” factors says that a parent should not unreasonably withhold access of the child to the other parent, but instead foster the child’s relationship with both parents. If you end up with primary custody, you and your husband agree to just “work it out,” later on, and then you tell him no a couple different times when he asks for time to see the kids (even if you have a perfectly good reason), you risk being brought into court and him accusing you of unreasonably withholding the child. Worst case scenario, you risk a change in custody.

It’s best and easiest for everyone involved if you just bite the bullet and make a plan for custody and visitation now, rather than later.

There you have it! Those are the 6 Separation Agreement Commandments. Now that you’ve read this article, you’ll be so much better prepared to draft, negotiate, and sign a separation agreement. If you need help or have additional questions, feel free to give our office a call at (757) 425-5200.