Under the Divorce Act, the Legislature has expressly encouraged divorcing parties to reach agreements to divide their property. Most of the time, a divorce court will accept most any property (real property, like land and the marital home, and personal property, like furniture and pots and pans) agreement. In fact, the parties are free to enter a property division that the court could not order or would abuse its discretion in doing so.1 However, there are three critical mistakes that some parties make in settling their property that may be impossible or expensive to fix in the future; these are the focus of this blog post.
The most important take-away from this blog post is that child support of any nature or type should not be tied to the property division. The parties are not free to contract away a child’s right to receive support. Any child support not paid through the clerk could be presumed to be a gift where it is indirectly paid, such as toward a martial obligation like a mortgage payment; this may be challenged later. This could leave the payor in the situation of being treated as not paying child support and thus with a large child-support arrearage, despite the fact the terms of the parties’ agreement ordered by the trial court expressly call for “child support” to be in the form of a mortgage payment.2 This is an unreasonable risk to take to get the divorce “done”. There are always legal challenges that can be made by skilled counsel if you find yourself in this predicament but avoiding this risk in the first place is the better course.
The second and somewhat common problem with settlement agreements ordered on divorce as to property is they do not account for all the property. There is a fundamental rule in American law called the “finality” rule. This favors the rule that once the time to challenge the order/decree/agreement (missing an asset or liability) passes,3 the trial court loses jurisdiction and cannot change the terms of the divorce decree in the case. This may mean the party whose name the real property is titled in keeps it because of title or the person who holds the physical item keeps it (this is where the adage applies that possession is nine tenths the law). The aggrieved party may be able to get the decree set aside, but only with skilled counsel and a trial.4
The third concept is related. If there is a debt that is really owed by the party whose name it is not in, but the settlement does not account for this, then the reality is the contract for the debt is between the lender and the party whose name it is in. Without specifying in the decree who pays for it, a party is likely stuck paying for a debt they should not or one the court may not have ordered them to pay if the case went to trial. Thus, all assets (everything from real estate to household goods to cars and personal property) must be accounted for or there may not be any remedy to fix an inequity, whether it be a forgotten asset or liability. At a minimum, the legal dispute will time and money and may have a small chance of success.
This blog post is written by attorneys at Dixon & Moseley, P.C. who handle divorce cases of all types, including drafting, enforcing and challenging property settlement agreements. We hope this blog post helps you become a more educated legal consumer and member of our participatory system of government. It is not intended as legal advice or a solicitation for services. It is an advertisement.