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Common Mistakes to Avoid in Your Marital Settlement Agreement

Couple's Hands With Divorce Agreement And Wedding Rings

Divorce in Texas is a difficult and emotional process. It requires dismantling much of one’s life in the hope of building something that will work better. The difficulty of preparing for a divorce can cause people to overlook or avoid important details. It can actually be more likely that spouses who are hoping for a quick and easy divorce will miss something critical, causing problems for both of them further down the road. A marital settlement agreement must address all of the important issues in the divorce. The parties should consider the financial impact of the divorce, how the divorce will affect their taxes, and what their needs are likely to be in the future. The following are some mistakes people make when preparing to negotiate a settlement agreement, during the negotiation, and after an agreement has been reached.

1. Going It Alone

We sometimes get calls from prospective clients who tell us that their divorce will be quick and easy because they and their spouse have already worked out the important issues on their own. Sometimes these prospective clients are right, but it often turns out that their divorce will take much more work than they expected, because they did not know about all of the considerations that must go into a divorce settlement agreement. The final agreement must address every outstanding issue, including property division, child support, child custody, and other matters.

Legal representation for both spouses can facilitate the settlement process, since family attorneys know from experience what the spouses need to discuss. People going through a divorce may miss out on other types of expertise as well. A financial advisor who focuses on divorce cases, for example, can be invaluable in helping spouses identify assets and find the best way to divide the community property.

2. Trying to Punish Your Spouse

Most divorce cases end with a settlement rather than a trial. Negotiating a settlement requires a willingness to compromise. Some spouses intend to use the divorce process to punish their spouse, and they may seek punishment or revenge through settlement negotiations. This can derail the process before it begins.

3. Settling Too Quickly

Some spouses remain convinced that their divorce will be easy, even after they see the full scale of the undertaking. They might decide to sign a settlement agreement without considering all of the implications. As a general rule, if something seems too good to be true, it probably is. This is where having skilled legal counsel can be invaluable.

4. Skipping Mediation

Mediators are trained to help combative parties in litigation reach an agreement that everyone finds acceptable. Divorce mediators often have vast experience with helping spouses identify important issues and find ways to compromise. Their skills can be highly useful for crafting a settlement agreement that will continue to meet the ex-spouses’ needs far into the future.

5. Missing (or Hiding) Financial Information

In order for spouses to reach a settlement agreement, they must both have full and accurate information about all of the property contained in the community estate. The discovery process allows each spouse to obtain information from the other about financial accounts, retirement plans, investments, insurance policies, and other assets in their possession. Each spouse has a legal obligation to produce requested information.

While it is not legally mandated, each spouse should also make sure that they have asked all of the necessary questions to learn about the full extent and value of the community estate. Going into a settlement negotiation without a full financial picture can put a spouse at a significant disadvantage. This could be the result of the other spouse concealing assets, or it could be because the spouse did not endeavor to learn everything they could.

6. Underestimating Your Budget

When discussing issues like property division, child support, and spousal maintenance, it is important to make a full accounting of one’s current income and budget. People regularly underestimate their budget during a divorce, which can lead to serious problems if the amount of support they pay or receive leaves them unable to pay their bills.

7. Disregarding Potential Tax Liabilities

Our tax system treats married couples differently than single taxpayers. This is a vitally important issue to consider when negotiating a divorce settlement. Property division can also lead to tax liability, such as capital gains tax after the sale of an asset. Providing an accounting of assets in a divorce is not just about listing the things the spouses own. It is also about determining the value of the parties’ assets in order to anticipate tax issues.

8. Ignoring the Big Picture, or Not Thinking Far Enough Ahead

People involved in divorces often assume that their current circumstances are a good guide for their future needs. This can result in underestimating one’s future budget, including both income and expenses. A person who is accustomed to a particular lifestyle might have to make major adjustments to their expectations once they are the sole earner in their household. The flip side of that is that a person who supported their spouse during the marriage should not assume that they will have far greater amounts of disposable income after the divorce. A settlement agreement should, as much as possible, allow for future financial complications like inflation and economic downturns.

9. Leaving Important Details to the Side

Settlement negotiations during a divorce are not the only time the parties communicate with one another, especially if they are co-parenting one or more children. It may be tempting to continue discussing the settlement away from the lawyers and anyone else who might be involved with the negotiations. If the spouses agree to terms that do not make it into the final settlement agreement, those terms will not be part of the final decree of divorce. They will be legally unenforceable, when the entire point of having a settlement agreement is to resolve all the issues of the divorce and, hopefully, avoid the need to return to court in the future.

Stacey Valdez is a board-certified family law attorney who practices in Houston, Texas and surrounding areas. We represent clients who are going through some of the most difficult ordeals people may face, including divorce, child custody disputes, and related matters. At Stacey Valdez & Associates, our clients and their families are always our top priority. We are dedicated to advocating for our clients with dignity and compassion. Please contact us today online, or give us a call at (713) 294-7072 to schedule a confidential consultation to discuss your case with a member of our team. Your first meeting with us is free in most situations.