Avoid These 8 Common Mistakes in Marital Settlement Agreements

Divorce can be daunting, but the challenges do not end with the decision to part ways. Crafting a marital settlement agreement (MSA) is often a crucial step in the process, yet many couples unknowingly stumble into pitfalls that can have unintended consequences for their futures.

From settling too quickly to letting your emotions get in the way, navigating the complexities of an MSA requires time, attention, and help from an experienced family law attorney. In this blog, we shed light on eight hidden issues many couples do not see coming, empowering you to safeguard your future and confidently embark on a fresh start.

What’s a Marital Settlement Agreement?

A marital settlement agreement (MSA) is a legally binding agreement between divorcing spouses regarding their rights and responsibilities after the split. You may also hear an MSA called a divorce settlement agreement, marital termination agreement, or separation agreement. An MSA covers essential areas such as alimony, division of property, child custody, parenting time schedules, and child support.

You and your spouse will negotiate your MSA together, with your attorneys’ assistance, which can also include a mediator’s assistance. Once you have finalized the agreement, you can proceed with obtaining the divorce decree from the court. Creating an MSA helps you frame out how you will handle various issues without going through expensive, drawn-out litigation and once it is signed, it is binding on the parties.

The Benefits of Drafting a Marital Settlement Agreement

A marital settlement agreement offers several benefits for divorcing spouses:

1. More control over the outcome: By negotiating and reaching an agreement outside of court, you and your spouse have more control over the terms of your divorce settlement. You can tailor the agreement to meet your needs and preferences rather than leaving important decisions up to a judge.
2. Privacy: Court proceedings are a matter of public record, but settling your divorce through an MSA can allow the details of the split to remain private. This can be especially beneficial if you want to protect sensitive financial or personal information.
3. Time and cost savings: Resolving issues through negotiation or mediation typically takes less time and money than going to trial. Avoiding prolonged litigation can save both parties significant legal fees and emotional stress.
4. Flexibility and creativity: MSAs allow flexibility in addressing unique circumstances and finding creative solutions that may not be available through court-imposed judgments. This flexibility can lead to more satisfying outcomes for you and your spouse.
5. Reduced conflict: By working together to reach an agreement, divorcing spouses can often minimize conflict and maintain a more amicable relationship, which can be particularly beneficial when children are involved. This can also lay a positive foundation for co-parenting in the future.
6. Finality and closure: The terms of the MSA are legally binding, providing both parties with certainty and closure regarding their rights and obligations post-divorce.
7. Enforceability: A properly drafted MSA is a legally binding contract, which means you or your spouse can enforce its terms if the other party fails to comply. This provides a level of security and assurance for both of you.

Overall, an MSA can offer divorcing spouses a more efficient, cost-effective, and less adversarial way to resolve their differences and move forward with their lives.

The 8 Most Common Mistakes Couples Make With MSAs

While creating an MSA sounds straightforward, many couples run into issues they were unaware of — and then make errors during the process. Check out eight of the most common mistakes couples deal with and how to avoid them.

Mistake #1: ‘Settling’ to get the MSA process over with
We get it: Divorce is an emotional process that can mess with your head. This is a scary, uncertain time. You may be going through a divorce that you do not want but that your spouse initiated. The problem with agreeing to “anything your spouse throws at you” to get the MSA over and done can result in an incomplete, unfair, or unenforceable settlement.

Taking the time to understand your current and future situation can give you the certainty that you have made the right decisions for your life in the future. Sit down with your attorney to review your MSA to understand the details so you can negotiate for a better outcome. This way, you will not get any unwelcome surprises when you finalize your divorce.

Mistake #2: Not going through your estate with a fine-tooth comb
When you face a divorce, your attorney will ask you to disclose your assets and debts to fully understand your financial situation. You and your spouse must provide documentation regarding assets and debts. This helps to avoid honest mistakes and intentional deception about what is subject to equitable distribution.

Here are some items you will need to compile:

• Bank, investment, and retirement account statements
• Property ownership documentation (deed to any properties you own)
• Mortgage records
• Insurance paperwork
• Income tax filings (highlighting interest and dividends to identify assets)
• Credit card statements (including rewards points allocation for division)
• Health Savings Plan statements
• Detailed inventory of valuable personal assets (e.g., sports memorabilia, art collections, firearms) with corresponding appraisals
• Real estate valuation reports

Mistake #3: Not reviewing tax implications
An example of a tax-related item to include in your MSA is who claims children on the tax returns. Another example includes the long-term tax implications of cashing out a retirement account early. Other assets may have tax implications if you sell them after your settlement.

Talking to your attorney, accountant, and financial advisor will help you make informed decisions. If you fail to do this, you may be responsible for higher taxes than you expected.

Mistake #4: Not consulting with your financial advisor
The prior mistake leads to this one. When you are facing a divorce, going from one household to two will impact your cash flow and standard of living. Unfortunately, some people will stick their heads in the sand when it comes to knowing what their future looks like: What will your bills total each month? What sources of income will you have to cover your expenses, like car repairs or vacations?

That is why we recommend enlisting your financial advisor early on, who can give you an independent view of your future financial situation. This expert will review your shared assets, debts, and income to help you envision your life post-divorce. Knowing this financial forecast can give you peace of mind and help you divide assets fairly in your MSA.

Mistake #5: Not respecting your spouse
If you are divorcing, you will experience a whole range of emotions – including anger, sadness, grief, and so on. Creating a mutually beneficial MSA shows that you and your spouse respect each other during this difficult time. If you aim to avoid an expensive, drawn-out court battle, a well-defined MSA can help.

Remember, once you sign an MSA, it is legally binding, and you will not renegotiate it. That is why it is smart to work with your spouse respectfully — and not “trying to get back at them” — to avoid future court battles.

Mistake #6: Getting too emotional
We are talking about emotions quite a bit here, but it is because you are going through an emotionally challenging time. Negotiating an MSA can get heated in some cases and ignite fiery feelings. If you get too emotional, you could derail your negotiations and end up in an expensive court battle.

We know that many divorces are not wanted by one party and are not amicable. Your spouse may also propose unfair terms. This is why we recommend meeting with your attorney in private to vent and review your next steps in the negotiation process.

Mistake #7: Not being willing to compromise
Here is the bottom line: If you refuse to compromise with your spouse to create a fair and equitable MSA, you will most likely end up in court later. Creating any contract involves having an open mind and being willing to negotiate. Not compromising can lead to difficult situations around spousal or child support or any significant issue in your divorce.

Mistake #8: Asking for too much
This mistake piggybacks on the prior one. If you are angry at your spouse, trying to “take them to the bank” with your MSA is not a good idea. Viewing your MSA negotiation as a power struggle may break down communication. Then, you could end up facing a contentious battle in court vs. reaching an amicable settlement outside the courtroom.

Consider Counseling Before Going to Court

Before deciding to divorce, consider the transformative potential of marriage counseling. This professional intervention offers a safe space for couples to explore and address underlying issues, improve communication, and rebuild trust. Through guided therapy sessions, couples can gain valuable insights, learn effective conflict resolution strategies, and rediscover the strengths of their relationship.

Marriage counseling allows both partners to express their needs, fears, and aspirations in a supportive environment, fostering greater understanding and empathy. By investing in counseling before pursuing divorce, you and your spouse may find renewed hope and a path toward healing and reconciliation.

Contact the Experienced Family Law Attorneys at Lawrence Law for Guidance About Your Marital Settlement Agreement

Lawrence Law helps clients throughout New Jersey navigate their marital settlement agreements and any complexities that arise, ensuring a smooth transition into the next chapter of their lives with confidence and clarity.

Call (908) 645-1000 to schedule a consultation or fill out our confidential contact form. Our offices are conveniently located in Watchung and Red Bank, NJ. If you need assistance with child custody or parenting time issues, don’t hesitate to contact us today.

The articles on this blog are for informative purposes only and are no substitute for legal advice or an attorney-client relationship. If you’re seeking legal advice, please contact our law firm directly.