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Divorce agreements not always conclusive

Wednesday, June 20, 2018

Settlement agreements are sometimes entered before divorce litigation to resolve issues such as property division or alimony. Legal obstacles, however, may undermine the finality of prenuptial agreements or divorce mediation settlements.

A spouse may seek to withdraw from an agreement before the court issues a final judgment. In one Texas case, a husband bought a winning $2 million lottery ticket after the judge announced the final decree, but before executing the final divorce decree including the verbal announcement of judgment. An appellate court found that the oral announcement that the divorce was granted, which was later incorporated in the divorce decree, prevented the man's spouse from invalidating the settlement.

Settlements should clearly indicate whether it will be part of a binding court determination. The judge should incorporate its terms in the final judgment, clearly announce that it is a final judgment and sign it. Contempt of court sanctions for noncompliance for violating judicial orders do not apply to private contracts. The agreement should also bind the spouse's heirs and estate.

A settlement may be invalidated if legal procedures and formalities were not followed. Agreements may need to be entered into evidence or filed with the court. Settlements entered through mediation should comply with certain procedural rules.

Texas law may override private settlement of issues such as child custody. Courts, for example, must consider the best interests of the child in all custody cases regardless of the spouses' settlement. Agreements may not restrict independent parties, such as child protective agencies, from protecting children.

An agreement should contain resolution of all major issues. Taxes, disposition of stocks and life insurance and bankruptcy should be addressed. Otherwise, various courts may rule on these issues.

A spouse may also attempt to enforce the settlement in a breach of contract lawsuit when the other spouse tries to withdraw from it. Enforcement defenses may include mistake, fraud, use of duress, incompetency or that the settlement is illegal. The settlement may be modified where a spouse's personal and economic circumstances change.

The means to act on future actions or payments should be addressed. The agreement should not merely state that a spouse should pay for a child's education but require the creation of a trust or other fully-funded financial mechanism.

An attorney can assist with drafting agreements that meet legal requirements and protect rights. Otherwise, a spouse may rely on an agreement that is later invalidated.

Source: Huffington Post, "Divorce settlement agreements may not be legally binding," Brad Reid, June 30, 2017

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