What You Need to Consider When Negotiating a Divorce Agreement

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Explore:  Divorce

In some situations, matters need to be settled in court, but the vast majority of divorces in California are resolved through a mutual agreement between the parties. Ideally, these agreements are formed through attorney-assisted negotiation or mediation. Unfortunately, however, some spouses try to negotiate their own divorce agreements and end up leaving out important details — and causing unintended consequences. 

While most divorce agreements aim for a fairly even distribution of property, achieving this goal is not always easy, especially when dealing with non-liquid assets. While liquidating property that cannot be easily divided may seem like a simple solution, it can sometimes create tax problems and can also mean parting with property one of the spouses would rather keep. To avoid these unintended consequences, a divorce agreement should collectively address all types of community property and debt: 

  • Debt
  • Real estate
  • Business interests
  • Retirement assets
  • Investments
  • Bank accounts 

Having a comprehensive distribution scheme allows you to more effectively manage property that cannot practically be split down the middle. 

For instance, if the spouses started a business, they cannot reasonably expect to continue running the business together after their divorce. However, they also do not want to simply sell the business, perhaps because its long-term potential is not fairly reflected in its present value or because it would generate unacceptable tax liability. Rather than simply selling it, one spouse could get the entire business while the other receives a greater share of the other community property to compensate. Alternatively, they could reach an agreement in which one spouse continues to own and operate the business but pays a periodic payment or share of the profits to the other.

Topics:  Divorce

Published In: Alternative Dispute Resolution (ADR) Updates, Family Law Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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