divorce settlement calculation: money, family drawing, broken paper

How Is a Divorce Settlement Calculated?

Filing for divorce can be emotionally, financially, legally, and sometimes even physically exhausting. It may sound like a good idea to just agree on terms with your ex to avoid “getting all the lawyers involved,” but the fact of the matter is that sound, ethical, legal help is necessary in matters of divorce. Unforeseen issues can pop up years down the road that do require legal aid. These could drive a person into debt trying to fix what could have been avoided in the first place. 

Fortunately, the divorce settlement agreement does not have to be as daunting or overwhelming as it may seem. This is even more true if you have a sound and competent divorce attorney to walk you through the process and fight for your best interests.  

What Is a Divorce Settlement Agreement? 

A Divorce Settlement Agreement is a legal agreement on which divorcing couples agree concerning the terms of their decision. It covers (not exclusively):

  • Custody/Visitation rights 
  • Child Support
  • Whether one spouse will pay alimony and what that would entail
  • How to divide finances, including property and debt

When calculating your financial settlement, these are some of the factors the court will consider:

  • Financial Resources/Income Potential of each spouse
    • Present and potential earnings (i.e. earning/accepting promotions)
    • The value of each spouse’s separate property, including an owned business, retirement and 401(k) plans, stocks, and bonds 
    • Resources owned and administered by third parties
    • In the case where a separated spouse is living with another partner, that extra income could potentially be considered
  • Standard of Living of each spouse 
    • Courts will strive to keep one party from falling well behind the other
    • Courts will also consider the standard of living that the children are accustomed to
  • Needs/Obligations/Responsibilities of each spouse
    • Follow the advice of your divorce attorney to look out for your best interest
  • Age and health of spouses and duration of the marriage
  • Future financial needs/liabilities of each spouse
  • Contributions of each spouse
  • Conduct

What Do I Do First?

Obviously, contacting a divorce attorney who understands your plight is an essential step. Most likely, your lawyer will advise you to establish your marital property versus separate property before you even begin to divide assets. 

Marital Property includes those items, assets, and debts that were obtained during the marriage. This also includes gifts exchanged between spouses.

Separate Property includes whatever was obtained prior to the marriage, including gifts, inheritance, and pension plan benefits. It can also include property and assets given to or inherited by one spouse during the marriage.  

The general rule of thumb is that each individual will keep their separate property after the divorce, with some exceptions. 

It is important to make note of your individual state’s laws regarding how property is to be divided. States generally divide assets 50/50 or, as in the state of Florida, through equitable distribution.

With equitable distribution, the courts attempt to divide assets fairly rather than equally. The needs of each party are considered and weighed. Equitable distribution is generally only necessary if both parties cannot agree on how to divide their property, and it only applies to marital property. 

Paul Bowen is a divorce attorney you can trust to handle your needs during the challenging process of establishing a divorce settlement. Click the link above to see how the Law Offices of Paul H. Bowen can help you in this trying time.