When negotiating a divorce settlement, there are several issues that the spouses must resolve, which may include one or more of the following:
identifying which assets are considered either spouse's separate property or the couple's marital propery
how to divide the marital estate
- determining whether one spouse will pay the other alimony, and if so, the amount and duration.
To further complicate things, couples must resolve all of these issues at a time when they typically aren’t seeing eye to eye, and where one or both spouses may be highly contentious. In this context, it can be easy to only see things from your perspective, which will likely be very different from your spouse’s point of view. When you're only looking out for your own interests, it's hard to truly understand what a fair resolution might look like. This article will lay out some of the principles of a fair divorce settlement agreement.
Separating Marital Property from Separate Property
A fair settlement must identify marital property and separate property. If one spouse owned property or assets prior to the marriage, and those assets haven’t been commingled, that spouse should receive that property in the divorce settlement.
An inheritance or gift received by one spouse is also separate property. If someone gives one of the spouses an inheritance or a gift at any time—including during the marriage—a fair settlement would award that asset to the spouse who received it.
When a spouse commingles separate property with marital property, it becomes very difficult to differentiate between the two types. If it's too complicated to trace a spouse's separate property contributions, the separate assets may become marital. For example, if one spouse has a bank account prior to the marriage, but deposits and withdraws money from that account for years without keeping records of the transactions or where the deposits came from, the funds left in the account are almost certainly going to be considered marital property upon divorce.
In some cases, it may be possible to identify separate property even if it has been commingled. If one spouse owns a home with $20,000 of equity at the time of the marriage, and the couple continues to pay the mortgage with their joint income during the marriage without refinancing, it may be appropriate to classify the equity (and a pro rata portion of the appreciation on the home) as separate property. States have different rules regarding how to trace commingled separate property, so see a local family law attorney for advice.
Dividing Marital Assets
In community property states, the couple’s assets and debts will be divided evenly (a 50/50 split) between the spouses. In equitable division states, however, the court will divide assets in a way that is equitable or fair, but not necessarily equal. Judges in equitable division states consider several factors when determining what constitutes an equitable division of the marital estate. Depending on your jurisdiction, the court may consider many factors, including:
- each spouse’s income potential
- each spouse’s separate assets and debts
- whether one spouse was at fault during the marriage, and
- whether one spouse mishandled or misused marital funds during the marriage.
When attempting to negotiate a fair settlement with your spouse, it’s helpful to consult with an experienced attorney who can estimate what a court would do in your situation. Each spouse should also determine whether a proposed division of assets and debts would result in a wide disparity in each spouse’s financial status after the divorce. A fair settlement should allow both spouses to pay for basic needs and plan for retirement.
Except for the rare circumstances where one parent is unfit to be around the couple’s children, a fair settlement will recognize that the couple’s children will be best off when both parents play an involved role in their upbringing. A fair settlement should include ample parenting time for each parent.
An equitable visitation agreement may not give parents equal custodial time, but it should provide for frequent and continuing contact with each parent. If one parent has played a larger role in the children’s upbringing, that parent will likely have the majority of time with the children, but the other parent should not be pushed out of the children’s lives.
The visitation scheduleshould consider both parents’ work schedules, and give each parent a roughly equal share of important holidays and school breaks. Except for rare circumstances, parents should have joint legal custody, with each parent having the ability to take part in decisions affecting the child's health, education, and welfare and direct access to the children’s educational, medical, and extracurricular information.
Most states use a child support formula that takes several factors into account and removes some of the guesswork for the parents.
A typical child support calculation will use the following information:
- each parent’s income and/or imputed income
- the child’s health insurance costs
- childcare costs
- private school tuition
- extracurricular activity expenses
- any out of pocket medical, dental, and mental health care costs.
A child support calculation may also include payments made that benefit the child, such as a portion of the mortgage one spouse pays towards the other spouse’s home.
A fair settlement agreement will also adjust child support according to the amount of time each parent has custody of the child.
When one spouse has been financially dependent on the other spouse for a long time leading up to the divorce, it may be fair for the working spouse to pay the other spouse alimony for a period of time.
Several decades ago, it was typical for a working husband to pay alimony to his ex-wife for long periods of time, and potentially for life. In today’s world, where it's quite common for both spouses to work, lifetime alimony awards are rare.
A reasonable alimony award will take into account each of the following factors:
- the paying spouse’s ability to pay alimony, considering expenses
- the receiving spouse’s financial needs
- the receiving spouse’s education and employment history
- the receiving spouse’s other sources of income
- the receiving spouse’s earning potential
- the education or job training the receiving spouse needs to complete in order to enter the workforce, and
- any physical, mental, or other deficiencies preventing the receiving spouse from earning an income.
There are many factors that go into a fair settlement, and as each case is different, there are no formulas that would work to determine a just agreement. If you have additional questions about what would constitute a fair agreement in your case, contact an experienced family law attorney in your state.