fair settlementIn a divorce case, we have a rule about not using the “F’ word.  No, it is not that word, but it is the word “Fair”.  Everyone wants a fair divorce settlement, but exactly what’s “fair”?   There are two major issues that must be resolved in any divorce–how to divide assets and what to do about the kids.  The major financial issues are to determine what assets belong to the community estate and what assets are separate property, who will pay child support, the amount of child support, and whether there will be alimony paid.  The major issues surrounding the kids are which parent will have custody and what sort of visitation schedule will the other parent enjoy.

1.  Emotional Issues

The major problem with trying to find a “fair” divorce settlement is that the spouses are angry at each other and not in a reasonable mood.  Generally, each spouse sees things from their own prospective and finds it difficult to think about the needs of their spouse, which are likely to be very different.  Looking at only one side of the equation makes it difficult to negotiate a fair settlement.  However, there are some principles that will help couples decide if a settlement is “fair.”

2.  Community or Separate? 

A fair settlement must identify community and separate property because only marital property can be divided during a divorce.  Any property owned prior to marriage, inherited, or received as a gift is separate property.  A fair settlement should award separate property to the spouse who owned or inherited it.  The problem is, sometimes community and separate property are commingled and it’s difficult or impossible to untangle them.  A fair settlement will include a procedure for tracing separate property into and out of the commingled account so each spouse receives his or her separate property.

3.  Asset Division

Most states require that community property be divided in an equitable manner, but that doesn’t necessarily mean a 50/50 split.  Judges consider several factors in determining what is a fair and equitable division of the marital estate, including the relative incomes of each spouse, the size of each spouse’s separate estate, whether one spouse was at fault in the marriage breakup, who has primary custody of the children, and whether one spouse mishandled community assets during the marriage.  A fair settlement should take into consideration the needs of each spouse, other assets available for support (income or separate property), and who was at fault in the breakup of the marriage.

4.  Child Custody

 Generally, courts recognize that it’s in the children’s best interest to have contact with both parents and will order joint custody of the children.  In rare circumstances, one parent may be unfit to care for the children and the other parent will be awarded primary custody.  Except in these rare cases, a fair parenting plan should allow both parents to spend ample time with the children.  Time with the children may not be equal, but it should be frequent and continuing to give both parents the opportunity to guide their children’s growth and development.  The visitation plan should consider the schedules of both parents and the wishes of the children.  And, both parents should have a say in making major decisions about their children.

5.  Child Support

When parents share custody, child support is usually determined by calculating the support each parent would owe according to a statutory formula and the difference is paid to the parent with the smaller income.  When one parent has custody of the children and the other parent enjoys frequent visits, statutory guidelines are based on the net income of the paying parent and the number of children involved.  A fair settlement should take account of the children’s needs and the relative incomes of the parents. 

6.  Alimony

When one spouse has not worked outside the home for years it’s generally fair for that spouse to receive spousal support to allow him or her to gain work experience or go back to school and finish a degree.  The factors involved in a fair alimony settlement include the paying spouse’s ability to afford the payments, the other spouse’s financial needs, the education and employment history of the non-working spouse, the size of the marital and separate property estates of the spouses, and the health, education, and age of the spouses. 

Many factors are involved in negotiating a “fair” settlement and because each case is different, there is no simple formula that will work for all divorces.  The best procedure is to consider the goals and interests of both spouses and negotiate a settlement that meets the important needs of both spouses.  A fair settlement is one neither side “wins.”

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