Top 10 Traps of Handling Your Own Divorce Settlement

Many people want to negotiate their separation and divorce without using an attorney.  The reasons typically revolve around saving money and/or the fear of evil attorneys creating an unnecessary fight.

I am all for people resolving their own disputes whenever possible.  But, in divorce, there are traps waiting for people who want to do it themselves.  Here is a list of 10 the most common traps:

1. Failing to account for capital gains taxes

A lot of people just divide up assets or debts without regard to this issue.  This can provide a nasty surprise if capital gains taxes reduce the value of the assets that seemed “equal” when you agreed on them.

2. Failing to structure financial terms to avoid taxes

Giving money or assets to your ex-spouse can bring on tax liability.  Withdrawing retirement funds can trigger tax liability.  Divorce situations can be excluded from some kinds of taxes, but only if handled correctly.

3. Retirement account division

Dividing these accounts is complicated.  There are federal, state and/or tax laws that must be satisfied to avoid bad surprises down the road.  Special orders from a court may be required to divide up a retirement account.  Also, planning for what happens if the owner of the retirement account dies after separation, but before the account is divided is complex, but crucial.

 4.    Small business and family business ownership

Small business and family owned businesses present special considerations for a divorcing family.  Failing to properly address these issues can lead to future problems with ownership, liability on business debts and other issues impacting the business.

 5. Planning for income changes in support obligations

I have talked to many people who tell me that they handled their own separation agreement and agreed to pay “x” dollars a month but now cannot pay it because they lost a job or took a pay cut.  This is a great way to end up in court and financial trouble.

6.      Agreeing to obligations that are not legally required

You may inadvertently agree to do things that no court could require.

 7.     Agreeing to things that are not enforceable

You may depend on your spouse’s agreement to do something only to later discover that you cannot actually require them to do it under the law of your state.

 8.     Failing to formalize your agreements properly

Creating a legally enforceable divorce settlement agreement in North Carolina is not as simple as a handshake or even a just a written signed agreement.  If it is not done correctly, your agreements may fail.

 9.      Agreeing to numbers without budgeting or planning

Too many people agree to financial arrangements without having the slightest idea of how those arrangements play out long term, or sometimes even short term.

 10.     Failing to structure spousal support for tax purposes

There are very specific tax laws and state laws that apply to spousal support payments.  Failing to structure spousal support payments appropriately can lead to surprising tax and legal ramifications years after you thought your divorce was put to bed.

 If you are facing separation or divorce, then consider consulting a qualified family law attorney before you finalize an agreement.  An ounce of prevention is often worth a pound of cure.

Online Legal Divorce Forms and Separation Agreements – Privacy Problems

Last week, I wrote about the need to consult an attorney prior to using an online separation agreement or divorce forms.  This week, I’ll discuss another problem with these forms: Privacy.

 

I have seen many clients that use these forms without an attorney.  Most of these clients record their separation agreement, child custody (co-parenting) agreement or property settlement agreement with the Register of Deeds.  They do this because something in the online form, the form’s instructions or something else on the internet told them that this recordation was necessary.

 

Unfortunately, once a separation agreement is recorded with the Register of Deeds, it becomes public record.  That means that anybody with a computer can easily look up, read and print your separation agreement if it is recorded with the Register of Deeds.  Anybody.  For any reason.  Friends, family, foes, members of your church, co-workers, etc…And I can tell you that people love to know the intimate details. Do you really want to give them access to that kind of personal information? 

 

There are some parts of a separation agreement and property settlement agreement that may need to be recorded with the Register of Deeds.  But, a good family law attorney can help you avoid making your entire agreement public knowledge.

 

I routinely advise clients to avoid this kind of public disclosure of their private lives.  After all, if you wanted the details of your separation to be public knowledge, then you could just go to court.  But, in North Carolina, there are ways to avoid making the terms of your separation public record. 

 

However, you would not know that unless you consulted a North Carolina family lawyer.

 

Online separation agreements and divorce forms can be useful.  But, there are risks in using these documents, and the loss of privacy is one of them.

 

Consulting a North Carolina family law attorney before using these online forms can save your privacy.



Online Legal Divorce Forms and Separation Agreements

Over the last few years, financial struggles have caused many people to look to online services for help in resolving their divorce issues.  These services typically provide low cost form separation agreements that can be purchased, downloaded and then completed by a couple.  These forms can typically contain provisions for property distribution, alimony, post-separation support, child custody, child support and separation.

I strongly support the movement to help people resolve divorce issues and reach separation agreements at a reasonable cost.  However, there are significant risks with using these online divorce agreements.

In this series of articles, I’ll address some of the issues that need to be considered before choosing to use online divorce forms and separation agreements.

Perhaps the biggest issue with these online divorce forms is that the companies specifically state on their websites that the forms are not a substitute for solid legal counsel.  For instance, LegalZoom.com states the following on the front page of its website (albeit at the bottom in a smaller and lighter font):

“Please note that LegalZoom is not a law firm, does not act as your attorney and is not a substitute for the advice of an attorney. Rather, it helps you represent yourself in your own legal matters. If you seek representation, are involved in litigation or have complex legal issues that cannot be resolved on your own, we recommend that you hire an attorney”.

Further, the online documents I have seen from clients contain a similar disclaimer in bold print on the front page of the form.

 

Specifically, the phrase “complex legal issues” presents a problem.  How exactly is someone who is not an expert on North Carolina family law supposed to know whether they have a complex legal issue?  How do you know whether this online legal form is going to be legally sufficient for your particular case?

 

One specific issue that I have seen is this:  Many clients use these online forms and believe that the matters in the agreement are forever settled.  Then something changes and the other party files a lawsuit that would alter some part of the agreement.  They typically tell me “I would not have agreed to this agreement if I had known that it could have been changed later by a court.”  Any North Carolina family law attorney could have warned about that issue up front.  That is the kind of information that people need to know before they sign any agreements.

 

In my mind, using an online separation agreement form is not necessarily a bad decision.  But, using an online separation agreement without at least reviewing it with a family law attorney may well cost you more in legal problems down the road then you are ever likely to save by avoiding the limited expense of some up-front advice by a knowledgeable lawyer.

 

In the next post, I will discuss some privacy issues with online separation agreements.

Randolph (Tré) Morgan III is an experienced family law attorney accepting cases in Raleigh, Cary, Apex, Garner, Fuquay-Varina, Clayton, Smithfield, Wake Forest, RTP, Durham, Chapel Hill, Holly Springs and surrounding areas.  He focuses his practice in divorce, child custody, alimony, child support, equitable distribution, property division, alienation of affection, criminal conversation, parentage, guardianship and other family related matters.  He is skilled in litigation, mediation, collaborative divorce, arbitration and traditional negotiation.