What It Is
A Separation and Property Settlement Agreement (commonly known as a “Separation Agreement”) is a legally binding contract between spouses that resolves all issues arising from the termination of the marriage. A separation agreement can settle the division of assets and debts, post-separation support and alimony, child support and custody, and waivers of claims against third parties. In other words, a well-drafted separation agreement allows divorcing parties to settle privately between themselves all the same issues that a court can decide. The advantages are many: It is much faster, costs far less, allows for flexibility and creativity (which going to court does not), and is private (lawsuits, and all the documents used as evidence in them, become part of the public record, searchable by anyone – including your children).
What It Deals With
Your separation agreement can and should cover the following items, as applicable:
- Division of real property, bank accounts, retirement accounts, and debts; and laying out a schedule and steps for how and when necessary events should happen, including refinancing, payment of debts, exchanging quitclaim deeds, and drafting and obtaining orders for the division of retirement accounts
- Division and transfers of ownership of family-owned businesses
- How you will handle taxes (including how to file prior to divorce and who will claim the children as dependents)
- Setting child support payments, how you will handle child-related expenses that don’t fit under child support, and how to handle future income changes
- Setting a child custody schedule, how to handle holidays and vacations, the need for adjustments in the future, and any special needs of your children or family
- Setting rights to decision-making for the children, including access to medical and school records, education, travel, and how to handle emergencies
- Establishing payments, duration, and grounds for termination of post-separation support and alimony payments
Standard, but Important, Provisions
There are a number of standard provisions your separation agreement should provide:
Free Trader Agreement: This provision allows you to enter into contracts without your spouse’s consent and without creating any property rights in their favor. While you are married (even if separated), your spouse has an ownership interest in any real property you purchase, even if you purchase it in your name alone. Likewise, any debts your spouse incurs while you are married are partially your debts as well (this includes medical debts). A Free Trader Agreement cuts off this marital interest and allows you to function independently from that date forward, even before you are divorced.
Attorney’s Fees Provision: A separation agreement should include a provision stating that if either side is required to file suit to enforce the provisions of the agreement, the prevailing party in the lawsuit can recover their attorney’s fees. This forces each person to adhere to the provisions of the agreement, even several years after it is signed, when things can begin to feel less urgent. Even when the value of the underlying dispute is small, the attorney’s fees for a lawsuit to enforce the agreement can be tens of thousands of dollars; knowing that these can be recovered serves to remind the parties of the importance of following through on their obligations.
Waiver of Estate Claims: While you are married, even if separated, you have all the rights North Carolina law grants to a surviving spouse in the event of the other spouse’s death. This includes the right to a spousal allowance, the right to inherit the spouse’s estate under an existing will or the laws of intestacy, and the right to act as executor of the estate. A waiver provision cuts off these rights as of the date the separation agreement is signed.
Subsequent Divorce: This provision can direct which person will be responsible for initiating and paying for the action for absolute divorce, which actually ends the marriage (see our Absolute Divorce page). It also covers whether or not the separation agreement will be incorporated into the order of divorce. There are pros and cons of incorporation. The advantage is that if either party fails to comply with the terms of the separation agreement, the other party can ask the court to enforce the agreement through its contempt powers; the disadvantage is that the terms of the separation agreement (including details of finances and issues regarding children) become public record. If the agreement is not incorporated, it can be enforced if necessary through a breach of contract action, just like any other contract.
Online Forms
Sample separation agreements can be found online, and although it may be tempting to use one, it is a very bad idea. A separation agreement is a description of the particular facts of your situation; it is designed to cover the issues that need to be resolved at the end of your marriage, to provide for your family going forward. A generic form downloaded from an internet site is not going to do all that. In addition, a generic form may not address the particularities of North Carolina law, which can make a future lawsuit more likely.
Requirement of Notarization
In North Carolina, a separation agreement must be signed by both spouses, and the signatures must be notarized. Without the attestation by a notary public, the agreement is invalid and will be disregarded by a court.
How Soon Can You Sign?
A separation agreement can be drafted immediately after you and your spouse have separated, as soon as you can reach an agreement on the issues you need to resolve. It can even be done shortly before you separate, as long as not much time elapses between the date of signing and the date of separation. A few days is probably fine; a few months definitely is not. To avoid a challenge to the validity of the agreement, it is safest to wait to sign until after you are in separate residences. Once the agreement is signed, you have to wait one year and one day from the date of separation, and then either person can file for divorce (see our Absolute Divorce page).
It is important that your separation agreement be executed before your divorce. If you do not pursue equitable distribution claims through the courts – or resolve them through an agreement – you lose your right to do so after divorce.