Negotiating Your Agreements - Property Settlement

Do I Really Need to Have Separation or Divorce Agreements? (Property Settlement)

(This is one in a series of posts having to do with negotiating your way through a divorce.)
Please fee free to subscribe to the blog, pass along comments or questions and/or suggestions for other articles. I will likely be updating these blog entries over time and will be moving to standard web site in the near future to continue to work of passing along useful information and helping those trying to get through this most difficult process.)

Often, couples considering divorce, do not know whether the monetary, time and emotional investment in divorce agreements are worth it. Only you can decide that. My purpose here is to give you food for thought for some of the issues that may come up in the near and long term future in regards to property settlement issues.

Generally speaking there are three categories of agreements that constitute divorce and/or separation agreements; visitation/custody, property distribution and alimony. Whether you are negotiating these with your spouse directly, or through attorneys or through some form or mediation (with or without attorneys) it is critical that you think about (and write down) issues that you want addressed long before you get to the point of having to sign off agreements. It is impossible to be able to look into the future and see how certain issues that you agreed to may play out in ways that you did not anticipate. There will be issues that you didn't even consider that you wish you had.

Having said that, keep in mind that no agreement can or should try to address EVERY possible scenario. Some people who are divorcing would like for that to be the case so as to not have to deal with their ex in the future. This will never be the case, especially if you have minor children.

If you dealing with lawyers at this point in the process, (prior to or after separation but before divorce) your attorney or your spouse's attorney will generally "start things off" with a "first cut" at an agreement. It is my opinion that YOU should set the tone and be the first to come up with that first cut. Your attorney will generally supply you a template that perhaps may be tailored to some of the issues that your attorney knows are important to you or area relevant to your state of residence. Remember the following however:

• Your attorney is not perfect (as much as you would like to expect that based on what you are paying!)
• Your attorney does NOT know every intracacy of your life, your past or your life's situation. As much as  your counsel would like you to believe, they do have other clients.
• YOU are the customer. You have the final say.
• It is YOUR responsibility to get every issue addressed that you want addressed.
• You will NOT get everything you want. However, the better prepared you are, the more bargaining chips you will have.

 You are very likely going through economic, emotional and physical stress. It is often difficult to think clearly. At some point you may well confront a feeling of "I just want this to be over with. I am tired of arguing the small points. Give me the pen and let me sign." You have to construct the process by which you "conduct your divorce" so as to avoid or minimize these feelings. You need a plan. You need to be organized.

When it comes to constructing and negotiating a property settlement agreement (and agreements in general) there are different tactics that can be taken. There are attorneys that like to take the tactic of building in a "negotiation buffer" into the negotiations. (That is don't come in with your best and final offer because you will have to negotiate away from that.)   It is is my opinion and observation that once you have time to look back on the proceedings, at least in terms of some aspects of property settlement and visitation, it is best to cut to the chase and be reasonable yet forceful. Legal fees, emotional stress and other considerations make it important for you to focus on what is most important. Perhaps property settlement will be the most important aspect of your divorce. Perhaps not. If so, give it your top priority and negotiate like there is no tomorrow. Know what you you want and determine what you can live without. Know what your spouse wants and what he/she might not want.

It may be very difficult for you to see that your "vision" may well change dramatically over time as it relates to property; this is especially true of household items. Many of these may hold sentimental value for you early on in the divorce process. Realize that your views may change and may change dramatically with time. Material items that may have had value at one point may well turn into a cash drain as you keep items in storage trying to determine where your new life will take you.

Another lesson that you will learn in the process is that you will NOT get everything you want and you will almost assuredly feel that you have been dealt with unfairly. My advice is to expect this, prepare for this and get over it. My lawyer once told me that the best agreements are those where both parties are unhappy.

Remember, where you are now in the process reflects a "business negotiation". If you can look at things in that fashion, you will likely be able to get through the negotiation best. The emotions of the divorce are certainly present and will be. You will be able to represent your interests best if you are able to look at the process of coming up with an agreement as strictly a business negotiation.

Here are a few elements (and your specific case may or may not include other apsects of 'property' that need to be addressed.

Household Items

Make a list of everything in the house and take photos of everything in the house BEFORE you start the divorce/separation process. It will protect you in the event that "things" disappear. Having said that, anything that you have that is indisputably yours personally (as in it was brought to the marriage before the marriage) should be yours. You might want to consider removing from the house. Consult with your attorney on this.


Do yourself a huge favor. Don't get hung up over minor household items. You should both get items of a personal nature or that you brought to the marriage. Agree to a "you choose, I choose" rotating process. Write down what each of you get. Thoroughly consider, especially if you are the one moving out of the house or if you are staying in the house for the short term but then plan on moving, what you really "want" or "need". If you have a grand plan to put your possessions in storage and then use them later for another residence, give that a LOT of thought. You may well change your mind down the road. The furniture generally will not do well in storage. You will find that you will want to make a "fresh start" with new furniture and a new life. The cost of the storage will quickly drive you to question why you wanted all this stuff in the first place. If your residence has one "big ticket" item, i.e. piano, you might need to modify the "I pick, you pick" scenario to account for that. You might want to give up that item but negotiate for something else that you really want. Make sure that you know EXACTLY what is going to be staying in the residence if the residence is being sold. You might by accident select something that is going to stay with the house and thus lose out.

Homes

Ensure that you get your fair share. Never start from a position of less than 50% share of net proceeds if the home is being sold. Ensure that you have language in the agreement that addresses the process by which the house is to be sold and what expenses you will be incurring, especially if you are the party that won't be living the house. Generally, one will agree to reduce the asking price a fixed percentage every month. Given the real estate market that you are in, you might want to consider putting in a "floor" amount and/or have language to agree to take the home off of the market and put it up for rent.

If you have shared income, never start from a position of paying remaining mortgage debt at a percentage higher than what your income represents as a percentage of the total family income.  In any of the agreements, when there are any elements of cost sharing (educational expenses, mortgages, etc.) based on percentages of income, if you are the higher income wage earner do NOT agree (without compensation elsewhere) to that percentage PRE ALIMONY. If you think you will be paying alimony, DEMAND that that percentage be based on alimony-augmented income for your spouse. Having said that, remember that this entire process is negotiable. The more legitimate issues that you note the more negotiating room you are going to likely have to improve your post-divorce economic situation.

Do everything you can to get the homes sold before you divorce. If you are going to be living the marital home, be CERTAIN that you understand all the expenses associated with the home. Do ALL due diligence to get all possible liens identified against the home. (Spouses who weren't paying the family bills often find surprises in this regard.) Know exactly what your expenses are going to be. Negotiate who will pay what part of the mortgage. If you are not going to be living in the house, during and post divorce, determine with your counsel what you believe is "necessary" and try not to get saddled with extravagent mortgage payments. Above all, do not agree to expenditures that you do NOT have control over. For example, if you are going to be paying for a portion of the marital home and expenses prior to selling, make sure you know what are reasonable utility bills and negotiate for a ceiling on your outflow for this expense.

Retirement Accounts

Generally start at a 50% allocation. Again, as with homes, ensure that you have ALL the contribution and withdrawal records and ensure that the account is immediately frozen so that any other withdrawals can not be made. Additionally, if you expect a lengthy divorce process, you might want to consider reallocation of the funds from any potentially volatile accounts into very stable accounts so that the account value does not fluctuate wildly during the divorce proceedings. Ensure that if the accounts are going to be split and you are receiving part of your spouses pre-tax retirement accounts, that you ensure that you do incur a taxable event. Ensure that a specific date is noted as what the split it based on.



Bank Accounts/Stocks/Bonds

If your children have bank accounts that you and/or spouse are joint signees on, get those frozen or have you both put on as required signees for any withdrawals.

Get a personal checking account and credit card immediately upon deciding to divorce. You will have a much easier time tracking your personal expenses that way. Get any joint accounts frozen immediately for which joint signatures are not required. Generally joint checking accounts require either of the two of your to sign. Get those accounts frozen immediately. Consult with your attorney as to how to proceed on this. I urge extreme caution in making withdrawals that might be viewed by a judge as "raiding" the joint account.

For any joint accounts, get ALL available statements and make copies. Keep those copies outside of your residence. You are generally not obligated to make copies of anything to give to your ex. Once you have decided to divorce do NOT give anything to your ex without your counsel being aware of it. Ideally the requests for information should be processed through counsel. Although  this generally increases the costs of the divorce, if you end up going to trial, you need to know EVERYTHING that they could use against you.

Again, as with retirement accounts, ensure that there are no "other" loans that might show up for which you might get stuck with. If you have a service that provides joint credit reports, get a copy of your spouse's credit report as soon as possible and go through it meticulously. If you can not get one on your own, make a formal request through counsel.

Gather all available records for any other stocks or bonds. Shoot for at least a 50% distribution. Now having said that, if the contribution history that you have for some asset was above and beyond what your spouse contributed, GET THOSE RECORDS. You should be making the case that while those may have been "legally" joint funds, you may have made short-term income sacrifices for the long-term investment gain.

Buying out his or her half

You may have other assets such as real estate where you might want to consider "buying out" your spouse's half. When considering these kinds of situations, make sure you perform "present value" calculations to determine that buyout amount. Don't just split the net value. Ensure that you determine the value reasonably but in your best interests.

All the above "advice" is given with the caveat that you should consult with counsel if you have any questions and know the laws in your state. You can never be "too" informed.