I encourage my clients to work out a divorce agreement whenever possible. In a divorce trial, a judge will listen to both sides expose the worst behaviors and characteristics of the other for an hour or two, then decide how you will both live the rest of your lives. Reaching a compromise through a divorce agreement, even if it’s not exactly what you hoped for, will nearly always lead to a better overall outcome for both parties.
I think most people realize this intuitively, so it is not uncommon for a client to come to me with a divorce agreement already mentally outlined. “We just need someone to draw up the documents,” they will say. Inevitably as I dive deeper into the details we will come across a point of contention they had never considered. What follows is a brief list of some of the things you should talk about or consider when you are discussing a divorce agreement, or just trying to work out the logistics of life to come.
Children are generally the most contentious topic in divorce agreements. You probably know to discuss who will primarily care for the children and when, but often the divorcing couple will forget to discuss child custody exchanges and other details:
- Who picks up or drops off the children and where?
- Will it always be at one place, or does it change based on who is picking up?
- How do we communicate if one of us has a conflict or runs late?
- How flexible can we be with all of these details, and what happens if we cannot agree in the future?
- Will these arrangements change if one of us has to move away?
Child support similarly has some overlooked aspects:
- Who pays for healthcare?
- How will other medical expenses be split?
- How do you notify the other party of a medical expense?
- Will you pay child support according to the standard guidelines, or a different amount?
- Will the party paying child support send a check to the Texas Child Support Office directly or will his/her employer deduct it from his/her paycheck automatically?
- Does one party owe the other party child support for the time spent caring for the children since you separated?
Texas is a Community Property state, meaning that most money and “stuff” acquired after you marry belongs to both parties equally, regardless of whose name is attached to it. (There are some exceptions to this rule that you should ask your lawyer about, particularly if you received an inheritance or large gift while married.) That said, it is usually not convenient to simply split everything 50/50. You should consider the following in your divorce agreement:
- How are you going to split the value of the house? Will you sell it and split the proceeds? Allow one party to keep it? If so, how will the equity be divided?
- Who will be responsible for any lingering debts attached to the house, such as the mortgage, service contracts, unpaid repairs, home equity loans, unfinished improvements, or mechanics liens? These things do not always need to go to the person who is keeping the house, particularly if they stem from a unilateral decision made by or for the benefit of the person leaving. Changing that liability, however, can be more complicated than a simple phone call.
- Do you have all of the important documents for your home? If not, who needs to acquire or deliver them, and by when?
- How will you handle property meant for the children?
- Will you place certain property into a trust, and if so, who will administer the trust? For what reasons can the trust property be used?
- Should your wills be drafted or altered to include certain agreed provisions?
- Does either party maintain life insurance? Should provisions regarding life insurance be included or altered?
Most couples each have a vehicle they consider their own, but other questions concerning vehicles that often come up include:
- How will you handle any unpaid balances?
- What about insurance, service plans, or title loans?
- Do you have all the title documents, or does one of you need to deliver them to the other by a certain date?
- If you have a hobby or extra vehicle, who gets it?
- What about any debt incurred on the third vehicle?
Investment properties, like rental homes or mineral rights, are likewise theoretically supposed to be split 50/50, but it is rarely best to sell them in a hurry and split the proceeds. Nor do most parties cherish the idea of maintaining ongoing contact to maintain and split the continuous profit from these investments. Your divorce agreement may need to address:
- Will one party “buy out” the other party? Or will you split the proceeds for a period of time?
- If so, how is “proceeds” defined—to include repair and maintenance costs or not?
- Who decides whether and how much to pay for these costs?
- What if you don’t agree?
Retirement accounts are often investment accounts themselves, and today may not be the best day to “cash out” and divide the proceeds. Some accounts may not be fully vested, leaving money on the table if they are closed out, and others will deduct penalties for closing out early.
- Is it best to wait to split these investments until they are vested or deducted?
- Alternatively, can you trade something of approximately equal value today for complete ownership of the retirement account?
- If there is more than one account, then how can you divide the accounts?
- How do you determine the value of a pension account today and in the long run?
Other miscellaneous topics to consider in your divorce agreement may include:
- Often the parties will have certain services attached to their property “bundled” to save money, e.g., car insurance and house insurance, or phone and internet services. Is it best to “unbundle” all of these services and lose the discounts, or should both parties pay half the bill or one party pay the whole bill and be reimbursed by the other?
- Is one of the parties eligible for spousal support? How much should spousal support be, and for how long? Does this change if the payer becomes unemployed? How else might spousal support end early?
- How will taxes be paid for this year? Is one party solely responsible, or will they be split? If they will be split, on what basis? How should you account for any investment income in your taxes? Who is responsible for any preexisting tax debt? Who claims the children on their taxes?
- Do you have any credit card, student loan, home equity loan, title loan, payday loan, vehicle financing, mortgage, medical, or other debt? Who will be responsible for each of these? What about debt incurred after the separation? What about unpaid bills?
- Will either party change their name in the divorce? Will the children’s names remain the same?
This list is by no means exhaustive, and each couple’s situation will be slightly different. Even if you and your soon-to-be-ex think you have a divorce agreement worked out, I highly recommend that you consult with a lawyer who can examine your circumstances and help you cover all potential issues. Working these sticking points out now can be the difference between a quick transition and a lifelong battle.