Securing the Terms of Your Divorce Settlement

Divorce settlement agreement document.

If you want to resolve your marriage without the need of a divorce trial, you and your spouse, with the help of your attorneys, will need to negotiate a divorce settlement. But to reach that resolution, you will need confidence that the terms you agree to will be honored. There are a variety of tools you and your attorney can use in securing the terms of your divorce settlement, making sure they will be carried out.

Protecting Liquidated Assets Prior to Entry of a Judgment of Divorce

Often, assets, like the marital home, may be liquidated or sold while the divorce is pending. But once those funds enter a party’s bank account, they could be used to pay personal expenses, or even be transferred to third parties. To secure this money, one law firm can put it in an escrow account, protecting them until the settlement is complete and the Judgment of Divorce is entered.

Securing Your Property Interests with Real Estate Liens

Often, the spouse awarded real property in a divorce settlement will agree to pay the other spouse an equitable share, or other money payments as a lump sum to offset its value. Including a real estate lien in your divorce settlement can tell the title company to pay you what you are owed out of the proceeds when that refinance or sale occurs.

Collecting Financial Payments Under the Judgment of Divorce

In other cases, one spouse will make payments to the other over time, to buy out a business interest, divide payments on marital debts, or reimburse a spouse for their attorney fees. A promissory note with an amortization schedule can help enforce that promise. The amortization schedule outlines the amounts owed, insurance rates, due dates, and terms of default in a separate contract that can be enforced through a collections action, often without making the other terms of your divorce settlement public.

Similarly, entering a Money Judgment in a separate civil action for money owed that is included in your divorce settlement can open up collections options without the hassle of filing a post-judgment motion in the family court. Money judgments can be collected using creditors’ exams, garnishments, and other tools that make getting paid easier.

Securing Future Promises to Pay

If your divorce settlement gives you the right to collect a portion of your spouse’s future distributions on things like annuities, rents, profits, or company dividends, you can also use a collateral agreement to put you first in line for payment from those funds. Entering this kind of security agreement ensures that you are treated as a priority creditor, so that future bankruptcies or poor business decisions are less likely to hurt your claim.

Where funds for payments are coming from a third party (such as a closely-held business or family trust), or when a spouse borrows funds from a family member to make payments, you may be able to have that third party sign a personal guarantee, ensuring that you can collect from them directly if necessary.

Family Business Interests Can be Secured with Consent Resolutions

If you are awarded a share of your spouse’s business, you need to make sure you are eligible to receive it. Many shareholder agreements allow companies to “claw back” shares awarded in divorce, meaning that, unless you have the agreement of authorized individuals within the company, an agreement solely between you and your spouse could end up being ineffective. Obtaining a consent resolution of shareholders can protect your rights as the non-business owner spouse, securing your divorce settlement.

Securing Child Support and Spousal Support Awards Against Bankruptcy and Death or Disability

Child support and spousal support payments can continue for years after a Judgment of Divorce is entered. That brings uncertainty in the forms of bankruptcy, death, and disability. If the paying spouse files for bankruptcy, family support orders are supposed to be protected. But it is best to ensure your spousal support award amount is clear in the Judgment of Divorce to make sure the full balance is preserved. Even if it is, if a bankruptcy or probate estate is relatively penniless, you may still be out of luck unless an insurance policy is in place to protect you. Many families agree that the paying spouse will maintain life and disability insurance with a benefit of at least the amount of spousal and child support owed over the duration of the obligation. That way, if something happens to the payer, the recipient and the children will still receive the funds. If you’re worried about your former spouse paying the premiums, consider paying them, yourself. And always get authorization from your former spouse allowing you to communicate with, and receive information from, the insurance company, noting that these authorizations must often be renewed annually.

Securing Your Divorce Settlement by Transferring Retirement Funds

Another strategy to secure your divorce settlement is to simply receive the money up front. Many couples agree to transfer larger shares of retirement funds (adjusted for taxes) to offset the recipient spouse’s interest in the marital home, business interests, spousal support or unpaid child support arrearages. However, in using this tool, you must remember that retirement accounts have age restrictions on when you withdraw the funds. If you think you will need the money soon, the taxes and financial penalties for early withdrawal need to be accounted for: in some instances, using a QDRO can eliminate early withdrawal penalties.

Strategic Use of Bonds to Secure Non-Financial Aspects of Divorce

Most of the options for securing your divorce settlement involve money changing hands. But the most important terms of many Judgments of Divorce involve children, not money. If you are worried that your spouse will not follow the parenting time schedule, keep the children in violation of a court order, or take them out of the country, you could require them to post a bond – money set aside and sacrificed if the court-ordered action is not performed. Bonds can also be used to ensure possession of the marital home, fund eviction proceedings, or protect against damage to property held by your former spouse.

Securing Your Children’s Interests in Divorce Using Trusts

Often, you and your spouse may agree that certain property – most often a college savings account, inheritance, or vehicle – really belongs to your children. However, they may not be old enough to handle that property themselves. In other cases, a child’s special needs or a parent’s short-term, significant income such as a one-time signing bonus such as for a sports contract or the proceeds from the sale of a business, may require additional security to make sure the funds are available over their entire childhood. If that happens, you may be able to construct and fund a trust with the assets or property in question. Often, both parents act as co-trustees and the trust includes written agreements restricting the use and distribution of the trust assets to secure the children’s interests while they are still young. In other cases, a third party is appointed as the trustee.

Contact Lawyers Who Can Help Secure Your Divorce Settlement

The high-asset divorce lawyers at Nichols, Sacks, Slank, Sendelbach, Buiteweg & Solomon know that resolving your marriage means more than entering a Judgment of Divorce. We understand the tools available for securing the terms of your divorce settlement. We can help you protect your interests, and avoid complicated enforcement proceedings after the fact. Call 724-994-3000 to schedule a consultation with one of our experienced Michigan divorce attorneys to discuss your financial situation and divorce needs.