A Marital Settlement Agreement (sometimes called a “Divorce Settlement Agreement” or “Property Settlement Agreement”) is a voluntary, binding contract between spouses who are divorcing (or obtaining a legal separation) in which they resolve once and for all the major financial and parental‐time issues. When approved by the court, it becomes part of your final judgment of divorce.
Below is an overview of the key components, plus drafting tips and common pitfalls to watch out for.
1. Why use a Marital Settlement Agreement?
• Control — You and your spouse craft the deal rather than leaving decisions to a judge.
• Privacy — Your terms remain private, except for the court’s incorporated order.
• Speed & Cost — Finalizing an agreement may be faster and less expensive than a contested trial.
2. Core Sections of an MSA
A well-drafted MSA usually contains the following articles or headings:
• Recitals/Background
– Identifies the parties, date of marriage, separation date, and purpose of the agreement.
• Definitions
– Clarifies terms used throughout (e.g., “Marital Property,” “Separate Property,” “Net Equity,” “Children”).
• Property Division
– Real estate (marital home, investment properties): who keeps what, how the buy-out is calculated, timeline for transfer.
– Bank and investment accounts, retirement plans (401(k), pensions, IRAs): present‐value offsets or QDRO instructions.
– Personal property: autos, furniture, jewelry—often by mutual lists or “right of first refusal” procedures.
– Debts: credit cards, mortgages, car loans—allocating responsibility.
• Spousal Support (Alimony)
– Amount, frequency (monthly, lump sum), start date, duration or termination events (remarriage, cohabitation, death).
– Tax treatment (post-2018 U.S. law: spousal support is neither deductible by payer nor taxable to recipient).
• Child Custody and Parenting Time (Legal & Physical Custody)
– Legal custody (decision-making authority) and physical custody/parenting schedule.
– Holiday, vacation, and special-event allocation.
– Procedures for exchanging children, dispute resolution, holiday rotation.
• Child Support
– Tied to state guidelines: income shares, health insurance, child‐care expenses, college contributions (if any).
– Mechanism for modifying support upon a significant change in income or needs.
• Health Insurance, Life Insurance & Other Benefits
– Which spouse provides health insurance for the children and/or ex-spouse, and who pays the cost.
– Life insurance policies naming children or spouse as irrevocable beneficiaries to secure support obligations.
• Taxes
– Who claims the children as dependents for federal and state tax returns.
– Responsibility for taxes on retirement distributions, capital gains, or other pass-through income.
• Debts and Liabilities
– Confirm that each spouse is responsible for the debts allocated to him/her, and that the other will be indemnified.
• Attorneys’ Fees and Costs
– Whether either party will pay a share of the other’s fees if the agreement must be enforced or defended.
• Release, Waivers & Mutual Covenants
– Each spouse releases any future claims against the other except as provided in the agreement.
– Noninterference in personal affairs and professional opportunities.
• Integration, Amendment & Governing Law
– States that this document is the entire agreement.
– Specifies how amendments must be made (usually in writing, signed by both).
– Identifies which state’s law governs interpretation.
• Signatures & Notarization
– Both parties sign (and date) in front of a notary; some states may require witness signatures.
3. Drafting Tips
1. Full Financial Disclosure. Both spouses should provide complete, accurate financial statements (income, assets, debts). Undisclosed assets can later void or allow you to attack the agreement.
2. Clarity & Specificity. Use precise labels: describe properties by address and legal description; list account numbers for sizable bank or investment accounts.
3. Consider Tax Consequences. A lump-sum payment in lieu of alimony, QDRO language for retirement plans, or who claims dependency exemptions can carry large tax implications.
4. Address Future Changes. Build in a process for modification if incomes change drastically or if children’s needs grow.
5. Child-Centered Provisions. Keep custody and support sections child-focused; include a dispute-resolution clause (mediation/arbitration) to handle disagreements.
6. Third-Party Professionals. If complex assets are involved (business interests, stock options), consider appraisals or CPAs to determine fair values.
4. Court Approval
• Once the MSA is signed, it’s submitted to the family court as part of your divorce paperwork.
• The judge reviews it to ensure custody arrangements serve the children’s best interests and that support terms meet minimum guidelines.
• Upon approval, the judge incorporates it into the final Judgment of Divorce; it becomes enforceable as a court order.
5. Enforcement & Modification
• If your ex breaches the agreement, you can file a motion for enforcement or contempt in the court that entered the judgment.
• For support or custody changes based on changed circumstances, file a motion to modify under your state’s statutes.
6. Common Pitfalls
– “I’ll handle that later” clauses on small-value assets often lead to disputes.
– Vague custody schedules—avoid “weekend parenting” without specifics on pick-up/drop-off times.
– Failing to adjust for inflation or cost-of-living in long-term support orders.
– Ignoring the effect of remarriage or cohabitation when setting termination triggers for spousal support.
7. Next Steps
1. Gather all financial documents (bank statements, retirement plan statements, tax returns, appraisal reports).
2. List your top priorities — property you most want, support levels you need, desired custody schedule.
3. Share a draft with your spouse or mediator, and negotiate missing or contentious terms.
4. Have an attorney review the final draft to ensure it complies with state law and protects your interests.
5. Sign, notarize, and file it with the court as part of your divorce petition or decree package.
A thoughtfully drafted Marital Settlement Agreement can save time, expense, and emotional stress—while giving you both more control over the outcome. If you have questions about specific language or how state law applies to your situation, consult a qualified family law attorney in your jurisdiction.