What Is a Marital Settlement Agreement (MSA)?
A marital settlement agreement is a legally binding contract between two spouses entered into either prior to, during or after the legal separation or divorce process in Illinois. Similar to a post-nuptial agreement, a marital settlement agreement details each of the provisions and terms that the spouses have agreed upon in connection with their separation and/or divorce. These agreements must be completed in the statutory form required by Illinois laws. This means that the language and content must clearly and explicitly outline the basis for and detailed stipulations of the agreement. Agreements should include detailed information on all matters related to support and maintenance (financial and alimony), property assets, real estate and personal property, as well as child custody, visitation, guardianship and support, if applicable. In other words , the agreement is intended to make determinations on each and every issue that may arise during the divorce process. Because a marital settlement agreement is essentially a legal contract there are some notable advantages to voluntarily implementing one of these agreements. Although the creation of a marital settlement agreement requires each spouse to completely and fairly disclose all financial information, including income and expenses, assets, debts, and any other pertinent information associated with their resources, this agreement also narrows the issues in the case and helps to settle cases in an efficient manner. Furthermore, because an agreed order is entered by the judge and is subject to enforcement by contempt of court, there is generally little to no wrangling over those issues that have already been settled by the couple.
Key Elements of a Marital Settlement Agreement
Regardless of the scenario, the most important matter to be addressed in any divorce case is (most often) whether or not a marital settlement agreement will ever be reached. So what the heck is a marital settlement agreement? The most straight forward answer is that it’s a written agreement between parties that are being divorced that resolves all issues of the marriage. This must take into consideration the distribution of all assets and debts, as well as matters related to the children (custody, visitation, support). Illinois law has a statute that lists about 40 separate sections that must be covered in the agreement for it to be considered comprehensive. While technically not required, many parents also voluntarily include a parenting plan at the end of the agreement. The statute requires that a marital settlement agreement address the following key issues:
• Division of marital property
• Child Custody
• Visitation
• Child Support
• Spousal Support (Alimony)
• Resolution of Tax Consequences
• Allocation of Payment Responsibility for Debts
• Division of Life Insurance Policies
• Division of a Business
• Other issues…
Once an agreement is drafted, it is presented to the judge at court on a specific date. At that time, the judge will ask the parties whether they agree to the contents or still have any questions remaining. Assuming everything is fully resolved, the agreement then must be notarized. There can be other language in the agreement though, so that the court is clear about some issues. For example, while the court cannot by law divide the retirement plans in existence, the parties are free to divvy up their assets as they see fit. Since we’ve already established that spouses own all marriage assets on an equal basis, one spouse might propose that he/she will receive both of the retirement accounts, but transfer an appropriate offsetting amount or property to his/ her spouse. A judge would require this be made clear by way of a paragraph in the judgment order.
Legal Requirements for a MSA in Illinois
Under Illinois law, any divorce settlement agreement must be in writing and signed by both parties. Standard legal terms and clauses usually fill the document. The Agreement should also specify what property each person will retain, and which debts are to be paid by whom. There should also be provisions in the Marital Settlement Agreement for what happens in the event either party does not pay his or her share of the child support, or if either party remarries or dies while the children are still minors.
In Illinois, the Court will always retain jurisdiction over issues related to allocation of parental responsibility, sometimes called "child custody," child support and visitation. However, the Court may not have continuing jurisdiction over other issues that may arise out of Divorce. The Court will not necessarily retain jurisdiction to enforce the Marital Settlement Agreement.
The Divorce Court does NOT have to approve the Marital Settlement Agreement so long as the parties have full knowledge of their respective incomes, assets and expenses at the time the Agreement was signed.
Creating a Marital Settlement Agreement
Typically the parties to a divorce start with very polarized views about what the term "equitable" means. They may have all kinds of bad feelings towards one another but the law does not allow those feelings to contribute to the resolution of their divorce other than in a limited way.
A marital settlement agreement is the divorce settlement. Some people will opt for trial because they don’t think they are able to reach an agreement with their spouse. Others feel that a marital settlement agreement is the preferred way to end their marriage. A marital settlement agreement has many advantages including control over the outcome, the ability to create the terms of the divorce rather than having a judge do so and giving the parties on a comprehensive understanding of their obligations to one another.
The first step toward creating a marital settlement agreement is to ascertain the assets and debts of the marriage. The parties have a duty and obligation to exchange information. The second step is to negotiate the terms of your settlement agreement. We always suggest that the parties not communicate directly with one another because emotions preclude rational communication in the early stages of a divorce. We recommend using email to facilitate the process and record the discussions. Once a document is drafted, have an attorney review that document. It is always a good idea to have an attorney draft the document, after the parties have agreed to the terms. Some people feel that if they have an attorney draft the document, the document will be "biased" in favor of whomever paid for the attorney or the office of the attorney. This is not usually the case. Any reasonable attorney who drafts an agreement for the parties will draft an agreement that is fair and not biased.
The final step in the process is to have an attorney sign off on the document that it complies with the provisions of the Illinois Marriage and Dissolution of Marriage Act and that it is in the best interest of the parties. Rather than consider getting a friend to draft the agreement, hiring an attorney to do so is a much better option.
Filing and Enforcing a MSA
Filing of a Marital Settlement Agreement – Submitting to the Court and its Approval
A typical marital settlement agreement provision provides: "We, the undersigned parties, have each received a full and fair disclosure of our respective assets. We waive the right to a formal or recorded inventory of such assets. We acknowledge that we have each had independent counsel and/or the ability to be represented by independent counsel in this matter and that any and all rights to appeal the contents hereof are knowingly, willingly and voluntarily waived."
Such a provision waives the right to appeal the Court’s order approving the parties’ settlement agreement.
The agreement must be signed in front of a notary public or certified court reporter and notarized in accordance with the Illinois Notarial Practice Act of 2001 .
At the time of signing the agreement, the parties must sign an appearance and waiver of rights to the following:
After the agreement has been notarized, the Petitioner (the spouse who files the divorce action) must file the original with the Circuit Court Clerk. All certified copies remain with the file.
The parties then appear before the judge on the date set in the Petition for Dissolution of Marriage (dissolution is the legal term for divorce in Illinois). Each party executes an Affidavit of Judgment on Maturity, swears to the truth of the contents of the marital settlement agreement and requests that the judge approve same.
If the agreement meets the approval of the judge, the agreement is pending Court approval, and; the judge will sign the judgment for dissolution of marriage, dissolve the marriage and incorporate the marital settlement agreement into the Court’s judgment as long as the agreement is fair and reasonable.
Amending a Marital Settlement Agreement
A marital settlement agreement, while a binding and enforceable contract in Illinois, is not necessarily immune from modification post-divorce. However, the critical requirement for making changes to a marital settlement agreement is that the parties both must agree. An agreement cannot be entered unilaterally: an agreement to modify a marital settlement agreement without the proper proceedings to address the change is unenforceable and void.
The legal procedure to modify a marital settlement agreement is essentially the same as modifying a prior divorce judgment. The court must have jurisdiction over the spouse and/or the child[ren] to make any changes to a marital settlement agreement after the divorce judgment is entered.
Working within these parameters, the parties may modify a marital settlement agreement by written agreement of the parties and the court may approve the changes. Or, if the parties cannot agree (or if they do not want to have the court approve the changes), they may seek to enforce the terms of the marital settlement agreement within the court’s jurisdiction.
If there was a failure to comply with the terms of the marital settlement agreement, the court may impose a court sanction as a remedy for the non-compliance. If you have any disputes about whether a marital settlement agreement should be modified post-divorce, you should speak with your divorce attorney.
Resolving Issues with a MSA
One of the first challenges individuals may face is not having a clear understanding of all the necessary legal and financial information required to create an enforceable MSA. This typically includes a full disclosure of all marital and non-marital assets, income and liabilities. To ensure all aspects of the marital estate are addressed and considered in the MSA, parties should seek the advice of an experienced divorce attorney and/or financial forensic expert.
A common challenge for many individuals going through the divorce process is hiding assets or making large financial transactions prior to the terms of the MSA being finalized. Some concealable assets criminals may try to hide, with the help of a spouse or accountant, include real estate, stocks, bonds, money orders or cash hidden in a safe deposit box or within the home. Concealment or failure to completely disclose information not only reflects poorly on the concealer, but can also trigger the court to immediately void the MSA and reschedule a trial in order to fairly address the full scope of the marital estate. To help protect your assets from fraudulent activities, consider working with a forensic accountant to conduct an asset search. Other red flags that should be raised include unusually large tax refunds requested or large cash gifts to third parties.
After a qualified domestic relations order (QDRO) has been drafted, reviewed and approved by both parties, some spouse or ex-spouse may deliberately act to delay execution of the QDRO by either neglecting to provide their attorney or the plan administrator all necessary paperwork, or refusing to sign the paperwork altogether. To avoid unnecessary delays, consult with an experienced lawyer who can draft and prepare the order based on years of experience and expertise in the matter.
Advantages of a Marital Settlement Agreement
A general understanding is that it is beneficial to have a comprehensive marital settlement agreement relative to the divorce proceedings and the substantive issues that must be addressed therein. For example, a comprehensive agreement will properly address issues regarding the division of marital property and the distribution of assets, parenting time and decision making issues, spousal support and maintenance, child support, tax considerations, retirement funds and benefits, and other matters that might come up during the divorce process . Bringing such matters in front of a judge can become a very costly and time-consuming endeavor, especially if the divorce process ends up going through multiple hearings, or is finally resolved at trial. Therefore, often times having a complete marital settlement agreement regarding all matters relative to a divorce proceeding can allow the parties to move on from the divorce relatively quickly and favorably to each, minimizing the financial penalties attributed to the process or the opportunities to reach a mutually beneficial resolution.