Property Settlement Agreement

A Property Settlement Agreement is a legal document that provides for the distribution of the parties’ assets and/or debts in a divorce. If agreed to by the parties, such an agreement is submitted to the Court for approval. The Court will generally grant approval unless it finds the agreement unconscionable (so unfair to one side that it must be modified). Once approved by the Court, the Property Settlement Agreement works like a contract for enforcement or modification purposes. Accordingly, the agreement must be entered into fairly; this means one party cannot withhold information (location, value, ownership, etc.) about property from the other party. If the parties cannot reach agreement on the settlement of the property, the Court will order a Property Settlement Agreement as it sees fit, subject to the laws of the jurisdiction. Typically, the agreement outlines the distribution of the parties’ property including:

• Community Property
• Separate Property
• Spousal Maintenance (if any).

Community property is property acquired during the marriage by either, or both, parties. Separate property is property that one party acquired before the marriage. Spousal maintenance agreements are typically included in Property Settlement Agreements. Additional issues that may be relevant to such an agreement include:

• Comingling. If separate property has been comingled (for example; in a bank account) then the separate property is likely community property
• Transmutation. Where there is separate property that the spouses have treated as marital property, making it impossible to tell what type of property the spouses had intended it to be. For example, transmutation occurs when the parties took title to property jointly but in reality only one of the spouses paid for the property.
• Valuation. The value of property can change over time, so it is important to consider the current value of the property when entering into a Property Settlement Agreement.