If a spouse files for divorce with a request for property division or for financial support, the options available to the court in deciding a disputed matter are governed by statute. Yet, if the spouses reach an agreement settling their issues out of court, and it is presented to the court for incorporation into a court order as part of the divorce, the court can accept the agreement even if the agreed upon outcome goes beyond what a court may order at the end of a trial.
Mediators and collaborative divorce professionals are trained to explore options and help clients evaluate such options and many have years of experience with settlements producing interest-based creative resolutions.
Here are some examples (most of these apply to Virginia which is where my practice is based; do not rely on any of this blog content without getting advice of counsel):
1. In a custody matter, a judge is not likely to order that holidays will be spent together with both parents and both children. However, parents can agree to spend special events and holidays together with the children and create circumstances where the event will most likely be a positive experience for all involved.
2. Parents can agree to more notice, than required by statute, of an upcoming move/relocation (which can benefit everyone by allowing time to negotiate a new parenting plan, if necessary).
3. A statute may require that the court decide child support based on guidelines, which would include some determination regarding income from all sources (even if there is a bonus that varies). A settlement can include a provision for the other parent, or an account for the child, to receive a percentage of any bonus received. There are various ways a percentage sharing can be structured to take into consideration extra work and performance by a bonus recipient. A settlement can provide the other parent with a share as spousal support and the children to with a share of the extra income as child support, or some equivalent. Such an arrangement can provide comfort to the bonus recipient who cannot rely on bonus until it is received.
4. There are some child-related expenses that are significant above and beyond health expenses and work-related childcare. While the court might have authority to deviate from the guidelines, some significant expenses can be one-time only (i.e., prom, graduation, college preparation and applications) or come and go as the child matures (i.e., camps, horseback riding, tutoring, ice hockey, driving, and cell phone).
5. Most parents will agree that children are not likely to become financially independent when they graduate from high school. Yet by statute some courts do not have authority to order payment for post-emancipation expenses for a child unless under special circumstances where the child has severe special needs and the court determines the child requires continuing support even though over 18. Most young adults beginning college, or some other route after high school, still look to their parents for support. The parents can contract to handle certain expenses in an agreed upon manner and the child may transition gradually toward financial independence.
6. Likewise, a statute may limit a life insurance obligation for a child who is a minor or a spouse if the spouse is receiving spousal support. Divorcing parents frequently contract to have life insurance for their children until the child graduates from college or a set age. A former spouse may need life insurance to cover additional expenses that may arise due to the ex-spouse’s death (i.e., income flow if there is need to change work status to be able to care for children, cover expenses for the adult children the deceased parent contractually agreed to pay).
7. Significant creativity can be built in to a settlement regarding spousal support. The parties can agree to a “step-down” so spousal support reduces gradually, limit terms of modification only under certain circumstances, agree to termination upon a certain event or age of the payor or payee. The parties can also trade a share of assets for spousal support (if the recipient wants to remarry, it is not a choice between spousal support or remarriage).
8. With respect to assets, a property division statute may limit what the court can award to the other spouse. For example, the statute may limit the amount that a former spouse can receive from a retirement account or pension of the employee spouse to “not more than 50% of the marital share”. There may be good reason that the parties would agree one spouse keeps all or more than 50% of one retirement asset in exchange for a waiver of another asset (retirement or non-retirement).
9. A spouse may receive stock options or restricted stock as part of compensation package and it is possible some or all may not yet be vested. If there is an award of an unvested asset, the benefit is not realized until “if, as, and when” the asset becomes fully vested. As an alternative, the parties can agree to a trade-off. On occasion, it may benefit the former spouse to have a liquid asset, even if it is a reduced value, because the other spouse keeps an investment that may be uncertain in value once fully vested.
10. When it comes time to filing tax returns, one party may significantly benefit from filing a joint return. While there may be no statutory authority to order filing jointly, the parties can contract their future filing status (if it is consistent with tax regulations) and how to deal with taxes due or refund received (nice if it is the latter!)
These are just a few examples of how parties can create a settlement that is most consistent with their needs and those of their children. It is interest-based and not tied to the statutory boundaries. In most cases, both spouses can gain from exploring ideas that go beyond what a court may be able to do, with a result that is more acceptable and that can lead to a durable agreement over time.