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A Property Settlement Agreement (PSA) is a contract between a married couple that sets out the terms of how they will move forward in their lives, both during their separation and after divorce. A signed PSA will be the biggest part of your divorce. In Virginia, the PSA will be filed at the courthouse, along with all of your other divorce documents when your case is ready for divorce -- usually, once you've met your required period of living separate and apart. (Other states have a very different series of events, so be sure to do your research.)
Here are the key areas of a PSA:
Parenting Arrangements (also known as Custody & Visitation)
Sets forth the schedule of custodial care. This section also sets forth how child-related responsibilities will be shared. This includes both the decision-making and day-to-day care for the children.
This section of your PSA sets forth both the presumed statutory guideline monthly award (dollar amount) and the actual child support amount to be paid (which may differ, somewhat, from the presumed guideline amount). This section also clarifies how certain child-related expenses, over and above the monthly child support award, will be covered, e.g. out-of-pocket medical expenses, extracurricular activities, work-related childcare (daycare, nanny, babysitter), camps, tutoring and private school. Some parties also choose to set forth how college tuition and related expenses will be shared between the parties once the child support obligation ends (usually at high school graduation or 18 years of age, whichever comes later).
This section of your PSA sets forth the dollar amount of spousal support to be paid (if any) and the duration during which it must be paid. Though the law is not clear, in terms of "how much" or "how long", there is a list of criteria that judges must consider in an alimony case. This section also sets forth whether or not spousal support will be modifiable or non-modifiable and, in many instances, the specifics of that modifiability. This section also sets forth, where necessary, waivers of the right to ever petition a court for spousal support at the time of signing a PSA.
Property & Debt Distribution
This section of your PSA sets forth the division and distribution of all marital property. In a divorce, the term “property” includes all assets: real estate, automobiles, bank accounts, investment accounts, stocks & bonds, businesses, antiques & collectibles, furniture, artwork, tools, etc. This section also clarifies all property that has been determined by the parties to be separate (e.g. non-marital). In Virginia, separate property is not divisible by the court, but the parties may choose otherwise. This section also clarifies how the parties’ debts will be handled during separation and post-divorce.
Other Key Components of a Property Settlement Agreement
Property Settlement Agreements in Virginia (and elsewhere) also include other very important information, such as:
- Date of Separation
The date upon which the parties agree they began living “separate and apart” (which may or may not be the date that one of the parties moved out of the marital residence);
- No-Fault Divorce
A clause that forbids either party to ever proceed with a divorce on fault grounds (e.g. desertion/abandonment, adultery, cruelty);
- Waiver of Right to Discovery
A clarification (if appropriate) that the parties waived their right to discovery (the court-supervised process of gathering documents and information from the other party;
A predetermination of how certain tax benefits and burdens will be divided between the parties (where appropriate, necessary and permitted by the IRS). Such items include the child tax credit, the child and dependent care credit, future filing status decisions while still married (e.g. married filing separately, married filing jointly), mortgage interest & real estate tax deductions, Schedule E deductions, and how future income tax refunds and liabilities will be shared.
There is No Such Thing as “Legal Separation” in Virginia – Property Settlement Agreements Resolve Some of the Resulting Confusion & Risk.
Most attorneys advise their clients to never move out of the marital residence without the benefit of a PSA. The reason for this is two-fold:
Risk – Setting Up Fault Ground of Desertion/Abandonment
Without a signed and notarized PSA, which clearly states that neither party is permitted to file a divorce on fault grounds, the party who leaves the marital residence is at risk of the other party proceeding with a fault-based divorce on the ground of desertion/abandonment. If the other party prevails, this could technically affect a judge’s ruling with regard to property and debt distribution. Though most judges in Northern Virginia do not apply a lot of weight to such ground, when dividing and distributing property, attorneys will present evidence of that desertion and abandonment because that is what the statute dictates. They really don't have a choice, due to malpractice concerns, but it will be you who has to pay dearly in terms of emotional strain and financial drain for this poorly drafted law.
Risk – Confusion in the Classification of Certain Property and Debt as Marital Property (divisible by a court) versus Separate Property (not divisible in court)
Virginia law states that most property and debt acquired post-separation is to be classified as separate property (non-marital). Judges are not permitted to transfer, to the other spouse, separate property. It is usually best, therefore, for parties to clarify what they have, in terms of their property and debt, at the time of separation. To avoid often confusing, and sometimes very stressful situations later, parties are well-advised, once they have decided to divorce, to make an accounting of their assets and debts, with values and balances. Parties should also be aware that, even though the courts are prohibited from dividing and distributing separate assets. parties are free to do as they please.
Property Settlement Agreements are Binding Contracts
Once parties sign a PSA, they have entered into a binding contract that is not renegotiated at the time of divorce. The key agreements and pertinent sections of the PSA are incorporated into the Final Order of Divorce (aka Divorce Decree). The signed and notarized PSA is filed with the court, along with all other necessary divorce documents. In essence, parties who have a signed PSA, during their period of separation, are operating under a contract; once those same parties are divorced, they are operating under both a contract and a court order (the Final Order of Divorce).
Parties must be aware, however, that all matters related to children (custody, child support), are always modifiable if there is a material change in circumstances. Parties are not permitted to negotiate away this right.
Can a Property Settlement Agreement Ever Be Declared Invalid?
Property Settlement Agreements, though almost always upheld in court, may be declared void (i.e. “invalid”) and, therefore, unenforceable, under the same circumstances as are other contracts. Though this is almost unheard of when a certified mediator handles your case, here are the pitfalls to be aware of:
- No Capacity to Form a Contract
One or both parties lacked the capacity to form a contract (e.g. serious mental impairment);
The contract is extremely unfair;
- Too Much Pressure
One or both of the parties signed the contract under duress, as a result of coercion, and/or as a result of undue influence;
- Factual Mistakes
There was a mutual mistake of a necessary fact;
The contract contains a violation of law or public policy; and/or
- No Full Disclosure
There was a failure to provide all relevant facts that would allow for informed decision-making with regard to the settlement terms (in a PSA, that usually means "financial facts").
The Virginia code speaks specifically to mediated PSAs at Va. Code §8.01-581.26. That is why an experienced and well-trained mediator will always make sure both parties are making informed, well-thought-out settlement decisions before they sign their PSA.
95% of Divorce Cases Settle Without Trial. Why Not Start With Settlement in Mind?
The vast majority of cases -- 95% being the most quoted statistic – never go to trial. That means that, after all the litigation strategy, motions, depositions, discovery, and very expensive legal wrangling, almost all divorcing couples end up settling their case without a trial.
Why not save a lot of time, money, and aggravation? If you are considering a divorce, or are in the process of getting a divorce, you might as well start with a settlement mentality and focus on reaching solutions to your divorce disputes that you both can live with before you engage in expensive and time-consuming litigation. That means: mediation.
The final result of your mutually agreed solutions to your divorce-related issues will be in the form of an enforceable Property Settlement Agreement which, if written by a qualified mediator, will be clear, enforceable, detailed, and written in neutral language that serves both spouses' interests.
If you have any questions about what goes into drafting a Property Settlement Agreement and how Graine Mediation goes about settling divorce cases, call Robin Graine at 571-220-1998.