Written by Avvo Staff

What is a divorce settlement?

A divorce settlement is the final legal agreement between a husband and wife that documents the terms of the divorce. Once the divorce settlement is signed by both spouses and accepted as fair and equitable by the court, it is incorporated into a document (sometimes known as a Divorce Decree) that formally dissolves the marriage.

Facts about divorce settlements

A divorce settlement details which spouse gets what property and what responsibilities once the marriage is over. It deals with child custodyand visitation, child support, alimony, health and life insurance, real estate, cars, household items, bank accounts, debts, investments, retirement plans and pensions, college tuition for children, and other items of value, such as frequent flyer miles and country club memberships. Conditions regarding tax payments, legal names, and provisions for modifying the agreement may also be included.

A couple can enter a settlement agreement at any time. Often, a couple creates a separation agreement when they legally separate or decide to live apart. This agreement covers all the major issues of a divorce settlement and is binding during the time leading up to a divorce. In many cases, this separation agreement becomes the settlement agreement and is incorporated into the final divorce decree. Agreements made through mediation may also serve as settlement agreements.

If a husband and wife can't come to an agreement on their own, the court settles property and debt distribution according to the laws of the state, and decides child custody and support in the child's best interests.

Important considerations regarding divorce settlements

Once the Court enters the Final Order of Dissolution, any failure to abide by the terms of the Order results in contempt of court. So it's always wise to have a lawyer review your divorce settlement before you sign.

You divorce settlement may have a significant affect on your taxes. If you receive alimony, it's taxable income. If you pay alimony, you get a tax deduction. Plus, depending on the distribution of property, you may face capital gains taxes. Understand the tax implications before you sign your settlement. Here again, your lawyer or tax professional can help.

One important point to keep in mind is any agreement between you and your spouse made outside of the divorce settlement is not enforceable. This includes any verbal agreement that has not been documented.

Overturning a divorce settlement

Once a divorce settlement has been signed and incorporated into a divorce decree, it is difficult to get out of. You may have to appeal to a higher court if the court that has jurisdiction over your divorce denies your petition. This varies by state and can cost you money and time. If you choose to challenge your divorce settlement, it's wise to understand what grounds are permissible in your state and to secure a lawyer for your case.

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