How to Write a Divorce Settlement Agreement

Your divorce settlement agreement is one of the most important documents you'll create in your lifetime. It needs to be thorough, clear and legally sound. Here's what you need to know to get started on one, whether you're writing it yourself or bringing ideas to your lawyer.

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What is a divorce settlement?

In a divorce settlement, both parties agree to a divorce's terms and conditions. A divorce settlement allows spouses to amicably divorce, avoiding a trial and long court battle.

You can also have a partial settlement, in which the divorcing spouses agree on certain issues and let the court decide the rest.

The term divorce settlement can refer to the actual paperwork or, more conceptually, to the arrangement the spouses agree to.

Terms like divorce agreement, divorce settlement agreement and marital settlement agreement are also used interchangeably. The official term depends on your location.

You may hear people say they settled their divorce "out of court" because settlements are negotiated outside a courtroom. However, divorce settlement agreements must be approved by a court and often require both parties to attend a court hearing.

How to write a divorce agreement

You might write a divorce agreement before you reach a consensus with your spouse so that you have something to propose. Or you might draw the document up after you've decided on the details together.

Though your agreement has to cover certain topics, the two of you get to choose the terms and conditions (as long as you comply with your state's laws).

If you choose to write a divorce agreement without a lawyer, be sure to use wording that will hold up in court. It must be clear and specific. Don't leave any loopholes or room for interpretation. Here are some examples.

Instead of: Isaac will pay Laura $150 in spousal support each month.
Say: Isaac will pay Laura $150 in spousal support by the 15th of each month.

Instead of: Derek and Anne will discuss their parenting agreement yearly.
Say: Derek and Anne will review their parenting agreement together in person each January.

Instead of: Nobody can call the child by a different name.
Say: Neither parent will change the child's legal name without permission from the other parent.

You can pay a lawyer to check your settlement for issues once you've drawn it up.

What to include

What goes in your settlement document will depend on your situation. Here are the most common elements.

Divorce property settlements

If you or your spouse own property — perhaps a home, vehicle or other valuable item — include a detailed description of how you'll divide it.

You might each take ownership of certain items — e.g., Charlie will keep the van, and May will keep the car. Or you might sell items and divide the proceeds.

Don't overlook details. If you'll sell the house, will you set a deadline? What will happen after that date if the house hasn't been sold? Who will pay for any repairs or fees involved in the sale?

For less-valuable property, you can include a general statement, such as, "The parties have divided between them the furniture, furnishings and all other belongings (tangible and intangible) they shared or used together, and neither will make a claim for belongings that are now in the possession or control of the other."

Divorce financial settlements

Nearly every divorce settlement includes finances.

Remember all of your accounts: checking accounts, investment accounts, pensions, etc. Specify how each one will be divided (or not divided). You also have to think about your debts — loans, credit card balances, etc. — and who will be responsible for them.

Then there's the issue of spousal support. If you decide one person will pay the other regularly, state not only the amount but also when the payments will happen, when they will end and what methods will be allowed (e.g., check, bank transfer). Some divorcing couples agree to use a one-time payment. If you choose to do this, list the details.

It's also wise to address in your financial settlement how you'll share costs that arise from your divorce, like court fees and mediation fees.

Address any other monetary issues that apply in your situation. Does one spouse need to stay on the other's life or health insurance policy? Who can claim what on taxes? Try to foresee any financial disputes you might have in the future.

Divorce business settlements

If either spouse owns a business, you have several options for how to deal with it in your divorce settlement.

First, you can let one spouse have the business. This might be a good solution if the spouse started it before your marriage or if the other spouse receives different assets in return.

Otherwise, you're probably looking at either selling the business, running it as co-owners or having one spouse buy out the other.

Owning a business adds extra complexity to divorce negotiations. If either you or your spouse is a business owner, you probably need a lawyer to write up your divorce settlement agreement.

Child custody settlements

Your child custody settlement may be a separate document attached to your divorce settlement, or the two may be in one document if you choose to address divorce and child custody together.

The custody part of your settlement is often called a parenting plan. Many times, it's the longest part of a divorce agreement because it has to address the many situations that can arise as a child grows.

First and foremost, your parenting plan should cover legal and physical custody.

Legal custody (sometimes called parenting responsibility) determines who can make decisions for your child. Explain whether you will share or divide this responsibility.

Physical custody (a.k.a. parenting time) determines where your child spends their days. State whether the child will live with each parent or primarily with one. Include a custody schedule with the specifics.

You will probably want to cover many other topics: education, discipline, babysitters, exchanging the child, child support and more. A parenting plan tool can help you think through the possibilities. The Custody X Change parenting plan tool suggests more than 140 clauses that you can customize.

Custody is different from the other elements of your divorce agreement because it will require you to collaborate with the other parent going forward. Be careful to set up your parenting plan so that it works for years to come. Address your child's future needs, and write dates so that they can apply to future years (e.g., the last day of the school year versus June 14).

Your custody agreement will need to be reviewed by a court to ensure it's in your child's best interest.

Other divorce terms and conditions

You'll need a few other terms and conditions to make your agreement complete.

Stipulate whether you'll be able to make changes to the settlement agreement, and how. State what will happen if you get back together; will the agreement still stand? And specify when the agreement will take effect. Usually, this is as soon as both parties have signed.

Divorce agreement templates

You can find divorce settlement agreement examples on law blogs and on websites that offer generic legal forms.

You can often get sample agreements from your court or your state's court system as well.

To write up the parts of your agreement that involve your child, use the Custody X Change parenting plan template. It walks you through categories to ensure you cover all the issues affecting your child during this transition. You can attach the thorough parenting plan to your divorce agreement.

Typical divorce settlements

Divorce settlements vary widely. Each one is unique to the couple divorcing. However, some trends do appear.

Usually, settlements are for no-fault divorces. This means that neither parent officially blames the other for the breakdown of the marriage.

Many spouses with similar incomes split assets 50/50 and forgo spousal support. Spouses with uneven incomes typically try to make things equitable through asset division and several years of spousal support.

Parents settling a divorce generally agree to use their state child support calculation.

Joint legal custody is far more common than sole legal custody in divorce settlement agreements. Joint physical custody is also common, but it isn't unusual for parents to agree to sole physical custody when they plan to live far apart.

After your divorce settlement

If you don't have a child, you may not need to have much communication with your former spouse after you part ways.

But if you have a child with them, your divorce settlement is only the beginning of your new co-parenting relationship. A co-parenting app can be vital to making it work.

The Custody X Change online app has a thorough set of co-parenting tools: shared calendars, parent-to-parent messaging, expense tracking and more.

Turn to Custody X Change to ensure the best possible future for your child and your evolving family.

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