Marital Settlement Agreement: What You Need to Know

A marital settlement agreement is a written agreement between the two parties in a divorce that divides property and possessions as well as deals with issues such as spousal support and child custody. You may see the terms marital settlement agreement, property settlement agreement, or divorce property settlement agreement used interchangeably. Parties can avoid the time, energy, and expense it takes to litigate these issues if they are instead able to work out an agreement that works well for their family. As California is a no-fault divorce state, many people find that they are able to amicably resolve these issues without either party having to place blame on the other for the end of their marriage.

While property settlement agreements can be created without a lawyer, it is generally not recommended. Most people do not have an after-divorce checklist handy and will likely fail to address everything required, finding themselves in quite the predicament once the divorce is finalized. Pitfalls include having agreements in place which are unenforceable, unintentionally drafting terms differently than the parties intended, and omitting particular assets, debts, or issues.

How a Community Property State Impacts Property Settlement Agreements

California is a community property state. There are only nine community property states in total, so it is not uncommon to ask, “What exactly is a community property state?” Community property is a term used to designate the assets acquired by a couple while they are married. It can apply to real, personal, or financial property. All property acquired by either spouse during marriage is presumptively community property. All property acquired before marriage or after separation is presumed separate property. Additionally, separate property includes property acquired during marriage by gift, will, or inheritance; property acquired during marriage with the expenditure of separate funds; and the rents, issue, and profits derived from separate property.

California’s designation as a community property state has a major influence on the structure and scope of property settlement agreements within California. Absent a valid agreement between the spouses, the marital property rights of California domiciliaries are fixed in accordance with California community property law. A community property state requires couples to divide each and every asset equally (50/50), with only a few exceptions. This rule (and its exceptions) only applies to assets acquired while you have lived in California. Property acquired while domiciled in a non-community property state does not ipso facto become community property simply because the parties later become California domiciliaries. Additionally, this rule does not apply to commingled assets. The mere commingling of separate property with community property does not alter the status of the respective property interests provided one can trace the asset back to its separate property source.

What a Property Settlement Agreement Looks Like

A property settlement agreement can change the way that assets are divided upon divorce, even in a community property state. The validity and enforceability of such agreements depends on compliance with applicable statutes and are subject to certain rules based on the relationship of the parties.

It is highly recommended that you have an attorney prepare your property settlement agreement. A lawyer skilled in the area of family law can help you divide property equitably and advise you of your rights under California law. A mediator can also assist you in dividing property equitably and drafting a property settlement agreement. Whether you choose to retain an attorney or mediator is based on your preference, but you should never try to prepare a property settlement agreement without a qualified third party. Property division is complicated and without the assistance of someone skilled in the area of drafting property settlement agreements, you risk forfeiting important rights you may have under California law. 

When preparing to communicate with a third party, whether that be an attorney or a mediator, about dividing your property in the event of a divorce, you should be prepared to complete a comprehensive asset list. All property, assets, and debts will need to be listed, including homes, furniture, art, jewelry, vehicles, bank accounts, retirement accounts, student loans, and credit card debts. Details regarding these assets will need to be included as well, such as the purchase date, how the asset was acquired, and the date the debt obligation was incurred. It is important that you are forthcoming with accurate information for your property settlement agreement.

Consequences for Violating a Property Settlement Agreement

Property settlement agreements are legally binding documents. It is important that you and your spouse abide by the terms of the agreement, as you both should be able to rely upon receiving the property to which you are entitled and have agreed upon with your spouse. Oftentimes, one spouse pays marital debts after separation and expects reimbursements for paying community and marital debts. These terms would likely be included in the property settlement agreement, along with provisions relating to community property reimbursement and exclusive use of the marital home.

If your spouse does not receive the property to which he or she is entitled because of your violation of the terms of the property settlement agreement, you could face serious penalties and legal action can be taken against you. You may have property confiscated from you and returned to your spouse. You may be ordered to pay significant fines. If you try to hide assets from your spouse, you could be ordered to give your spouse 100% of that undisclosed asset due to your actions. If you intentionally undervalue or overvalue a particular asset, you could be penalized. If you fail to execute the appropriate paperwork so that your spouse can obtain his or her awarded asset, you could be ordered to pay fines and costs for your behavior. You could also face criminal charges arising from any of these violations of your property settlement agreement.

Don’t Try to DIY a Property Settlement Agreement

Property settlement agreements are a common part of marriage and divorce proceedings. They function to legally divide assets between two spouses and deal with important issues such as spousal support and issues regarding children. The laws in California, a community property state, are intricate, detailed, and require a person with a vast deal of knowledge and experience in the area of family law to navigate them in the drafting of a property settlement agreement. Property settlement agreements are legally binding and you face serious legal ramifications if you withhold information or violate the agreement. The attorneys at Cage & Miles, LLP have the knowledge and experience necessary to ensure that your property settlement agreement protects your rights and will be accepted in a court of law. 

Get help with your property settlement agreement. Contact Cage & Miles to meet with a Client Intake Specialist today.