9 Things Often Overlooked in Divorce Agreements
With so much to think about, it’s easy to overlook critical issues when drafting your divorce agreement. However, failing to address these things can cause major problems down the road. Here are some of the key things that divorcing couples often forget to include in their divorce settlement agreements.
1. Financial and Tax Implications
One of divorce’s most commonly overlooked aspects is the financial and tax implications. Many couples focus purely on dividing up assets and determining spousal and child support amounts. However, evaluating settlement proposals from a long-term financial perspective is crucial.
Some questions to consider:
- What will be each spouse’s tax liability after the divorce? Are there ways to structure the agreement to minimize taxes?
- How will retirement accounts and pensions be divided?
- Who will claim children as dependents on their taxes?
- How will investments, property, and other assets be divided and retitled?
Consult with a financial planner or accountant as part of your divorce process. Understand the tax consequences of your settlement before signing on the dotted line. An experienced Minnesota family law attorney can help you negotiate an agreement that protects your financial interests both now and in the future.
2. Life Insurance
Another thing divorcing spouses often forget to address is life insurance policies. If one spouse dies before the divorce is finalized, the other spouse could still benefit from their life insurance policy.
To prevent this, modify life insurance policies as soon as divorce proceedings begin. Name a new primary beneficiary, such as a child, sibling, or trusted friend. This ensures assets go to the right person if the unthinkable happens.
3. Overlooking Retirement Assets and Pensions
Another common mistake divorcing couples make is failing to adequately address the division of retirement assets and pensions in their settlement agreements. This often happens because retirement accounts seem far off, while issues like child custody feel more immediate. However, overlooking retirement funds during a divorce can greatly impact your financial security later in life.
In Minnesota, retirement assets like 401(k)s and pensions are considered marital property and are subject to division in a divorce. The equitable distribution laws require that these accounts be split fairly between spouses. However, the process is complex, often requiring additional legal procedures like Qualified Domestic Relations Orders (QDROs).
Working with an experienced family law attorney is essential to ensure your retirement assets are properly divided in your divorce agreement. Overlooking these accounts or failing to transfer funds post-divorce correctly may prevent you from accessing the savings you are entitled to. Protect your financial future by giving retirement accounts the proper attention they deserve.
4. Wills and Estate Plans
Along with life insurance, reevaluating wills and estate plans is crucial. Many spouses forget to update their wills after a divorce. An outdated will means your assets could still pass to your ex-spouse after you die.
Work with an estate planning attorney to modify your will, trusts, medical power of attorney, and financial power of attorney documents. Inheritances, unpaid alimony, and other sticky situations can arise if ex-spouses remain named in estate planning documents. Don’t let a lapse in planning put your hard-earned assets in the wrong hands.
5. Spousal Support Agreement Details
Spousal support (alimony) is another area where more details in the agreement can prevent problems later. The divorce decree should spell out:
- The exact spousal support amount and duration
- How/when the payments will be made
- What events would trigger termination of payments (e.g., recipient getting remarried)
Without these details, ambiguity can arise when it comes time to make or end spousal support payments. Clear spousal support terms prevent your divorce from re-entering the court system years later to address unanswered questions.
6. Uneven Asset Division Based on Length of Marriage
Under Minnesota law, marital assets are divided equitably between spouses at divorce. While this often means a 50/50 split, the law allows for unequal division based on certain circumstances. One factor that courts can consider is the length of the marriage. However, this issue is sometimes overlooked in arriving at divorce settlements.
If you were married only a very short time before separating, your contributions to assets like the home or retirement savings may have been minimal. In cases like this, it can be reasonable for your divorce attorney to negotiate a settlement where you receive a smaller share. On the other hand, if you have been married for several decades, dividing assets 50/50 is usually more appropriate even if one spouse earned more.
Don’t let the length of your marriage be an afterthought when negotiating your divorce agreement. Ensure your attorney considers how this factor may impact property division to ensure your settlement accurately reflects your contributions during the relationship. An experienced divorce lawyer can help ensure you receive a fair share.
7. Child-Related Decisions
Of course, details related to children deserve special attention in your divorce settlement. First, the custody and visitation schedule should be extremely detailed, covering:
- Which parent will have the children on specific days/holidays
- Drop-off/pickup logistics
- How to handle potential schedule changes, vacations, etc.
Next, spell out the exact process and timeline for determining or modifying child support. Details like which parent claims the children as tax dependents should also be addressed.
And don’t forget new decisions that arise upon divorce, like who will participate in parent-teacher conferences or who must consent for the child to get a driver’s license. Thinking through these issues ahead of time helps avoid problems down the road.
8. Updating Account Beneficiaries
Similarly, one crucial step that often gets overlooked when finalizing a divorce is updating your beneficiaries on financial accounts and insurance policies.
If you previously named your former spouse as the beneficiary on accounts like your life insurance, 401(k), or pension, those designations do not automatically change after your divorce. That means your ex-spouse could still receive those funds if you pass away, even if you no longer intend for them to inherit those assets.
It’s imperative that you update the beneficiary information on all your financial accounts and insurance policies as part of your divorce process. Name new beneficiaries like your children, siblings, parents, or trust to prevent your assets from inadvertently passing to an ex-spouse whom you no longer want to inherit. This small detail can make all the difference in ensuring your assets are distributed how you desire.
9. Debts and Liabilities
Finally, clearly outline how debts incurred during the marriage will be divided. Defaulting on a joint debt impacts the credit of both spouses. So, even after the divorce is finalized, how debts are handled still matters greatly.
List every joint account, loan, and shared liability. Then, assign responsibility for repayment to one spouse in the divorce agreement. Joint debts can’t just be ignored – they must be addressed. Doing this prevents endless fighting or confusion over old bills.
Consult a Minnesota Divorce Attorney Today
Divorce is complicated, but you don’t have to do it alone. The experienced family law attorneys at Martine Law can help you negotiate a complete divorce agreement in Minnesota. We help protect your interests and ensure no critical issues fall through the cracks.
Contact us today to discuss your situation and get started on finalizing your divorce settlement. With an iron-clad agreement in place, you can move forward with confidence post-divorce, knowing assets and decisions regarding your children are protected.