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Don’t Forget to Consider This When Evaluating Your Divorce Settlement

When I look at divorce settlement proposals for clients as part of my Strategy Sessions, there’s one thing I consider above everything else. I’d encourage you to do the same. In evaluating your divorce settlement, think of this first and foremost: Are you able to uphold this agreement?

Oftentimes, people want the maximum child and/or spousal support possible — and I get that. However, if someone is making a promise they can’t uphold yet they’re signing a legal, binding document saying they will, it could land everyone in hot water (or, at the very least, lead to unnecessary drama and possible post-decree issues).

It’s important for you and the other person signing the divorce agreement not to make promises you can’t keep. Consider these three things when evaluating your divorce settlement to ensure you're not forgetting the cardinal rule of “don’t make promises you can’t keep.”

Be Realistic

Like I wrote in Refinance Your Home: 2 Things to Consider Before You Sign, there are some pretty serious consequences if you aren’t able to follow through on the terms of your divorce settlement. It’s so much better to be proactive than have to deal with the consequences after you’ve agreed to follow through on something that you realistically aren’t able to uphold in the long run.

If you’re not in the place to follow through on the agreement, don’t sign it! On the flip side, if the person on the other end of the agreement can’t uphold their promise, yet they make the agreement for whatever reason, don’t expect to see that money.

Pay Attention to the Wording of Your Divorce Settlement

There are times when people make agreements and the way they structure them, they’re actually disincentivized to follow through on it. It’s a sneaky way to get around consequences. With the ways things are worded, you can outline things so that they can’t be followed up on or it’s easier not to follow through on them. 

Here’s an example. I recently reviewed a proposed settlement that included a family business. The parties were considering an agreement that required the wife to receive a portion of the business distributions annually for a period of five years in order to pay out her equity in the business. However, the husband was in charge of the business and in charge of determining how much profit from the business would be distributed annually. There was no minimum payment identified in the agreement nor was there any detail regarding how the payout would be calculated. Thus, he was really incentivized to reinvest in the business rather than pay out distributions to his soon-to-be-ex.

Another example was an agreement that I reviewed where the parties planned to share a pension benefit in the future. However, the terms of the agreement were not aligned with what the pension actually allowed. Thus, the terms of the agreement just were not going to be possible.

This is why it’s so important that your divorce settlement clearly defines the terms of the agreement. If it all just seems like legalese to you and you don’t truly understand it, additional clarification may be necessary. This is important so there can be accountability for someone following through on the agreement. 

Related Reading: How to Prepare for Divorce for the Stay-At-Home Mom

Consider The Other Person

As challenging as it could be to consider the person on the other end of the agreement right now, it’s imperative when evaluating the divorce settlement. Don’t try to force the other person to make agreements they can’t keep. As I tell my kids all the time, “How would you like it if you were in that position?” It wouldn't feel good!

I often hear: “I want to keep my lifestyle the same and I’m entitled to it.” While I understand this is a challenging time and maintaining a certain level of normalcy is helpful for both you and your kids, there are times when it just isn’t feasible.

The reality is that expenses increase when going from one household to two and unless income comes up to meet the expenses, it’s likely that both parties will need to make some adjustments..

Consider what you’d like someone to extend to you and try to extend that to the person on the other side of the settlement papers. Don’t strong-arm them into signing an agreement that they can’t keep. You’ll both be frustrated and upset. Further, you’ll possibly have to deal with post-decree issues, which comes with a whole other set of headaches.

Related Reading: Starting Over Financially After Divorce

At the End of the Day… 

Don’t make promises you can’t keep! It’s easy to get lost in the weeds when negotiating a settlement because there is so much to decide. However, one of the first things I consider when attorneys send settlement documents for feedback is whether or not it’s realistic.

Furthermore, don’t force someone else to make promises they can’t follow through on. Make sure it’s practical for everyone and has clearly defined terms so everyone is aware of what the consequences are before signing anything.

You may not like the whole of the agreement, but at the end of the day, you’re better off agreeing on realistic terms so you at least get something.

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