Preparing Agreements: Settlement Agreements, Marital Agreements, and More

59 Pages·2012·0.35 MB·English

PREPARING AGREEMENTS:
SETTLEMENT AGREEMENTS, MARITAL AGREEMENTS,
AND MORE

EMILY MISKEL
KoonsFuller, P.C.
5700 W. Plano Pkwy., Suite 2200
Plano, Texas 75093
[phone]
[email protected]

Texas Family Law Practice for Paralegals Seminar
Arlington, TX
September 19, 2012
TABLE OF CONTENTS
I.  SCOPE OF ARTICLE. ....................................................................................................... 1 
II.  ATTACHMENTS. .............................................................................................................. 1 
A.  Property Division Spreadsheet ............................................................................................ 1 
B.  Informal Settlement Agreement ........................................................................................... 1 
C.  IRS Alimony Requirements ................................................................................................. 1 
D.  Creative Possession Schedules ........................................................................................... 1 
E.  Parenting Plan Form ............................................................................................................ 1 
F.  Property Division Form ....................................................................................................... 1 
G.  Marital Agreement Waiver of Financial Disclosure ........................................................... 1 
III.  DIFFERENT TYPES OF AGREEMENTS. ........................................................................ 1 
A.  Rule 11 Agreements ............................................................................................................ 1 
B.  Informal Settlement Conference Agreements ...................................................................... 2 
C.  Mediated Settlement Agreements ........................................................................................ 3 
D.  Agreements Incident to Divorce ......................................................................................... 4 
E.  Agreed Parenting Plan or Agreement Concerning Support ................................................. 5 
F.  Pre-Marital and Post-Marital Agreements ........................................................................... 5 
IV.  HOW TO PREP YOUR ATTORNEY. ............................................................................... 5 
V.  PROPERTY AGREEMENTS. ............................................................................................ 6 
A.  Property and Debts .............................................................................................................. 6 
B.  Closing Documents .............................................................................................................. 7 
C.  QDROs ................................................................................................................................. 8 
D.  Taxes ................................................................................................................................... 8 
E.  Order to deliver certain property .......................................................................................... 9 
F.  Undivided property .............................................................................................................. 9 
VI.  CHILD-RELATED AGREEMENTS. ................................................................................. 9 
A.  Parenting Time .................................................................................................................... 9 
B.  Child Support and Health Insurance .................................................................................. 10 
C.  Rights and Duties ............................................................................................................... 10 
D.  Geographic Restriction ..................................................................................................... 10 
VII.  SUPPORT AGREEMENTS. ............................................................................................. 11 
A.  Contractual Alimony vs. Ch. 8 Spousal Maintenance ...................................................... 11 
B.  Ch. 8 Spousal Maintenance................................................................................................ 11 
1. Eligibility for Ch. 8 Spousal Maintenance ........................................................................ 11 
2. Duration of Ch. 8 Spousal Support ................................................................................... 11 
3. Amount of Ch. 8 Spousal Maintenance ............................................................................ 12 
4. Enforcement and Modification of Ch. 8 Spousal Maintenance ........................................ 12 
C.  Contractual Alimony .......................................................................................................... 12 
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D.  IRS Alimony Rules ........................................................................................................... 12 
E.  Drafting .............................................................................................................................. 13 
VIII.  OTHER PROVISIONS ..................................................................................................... 13 
IX.  FORM OF THE AGREEMENT ........................................................................................ 13 
X.  CONCLUSION. ................................................................................................................. 14 

ii
PREPARING AGREEMENTS. agreement between attorneys
or parties touching any
suit pending will be
I. SCOPE OF ARTICLE.
enforced unless it be in
The purpose of this article is to cover some of writing, signed and filed
the different types of agreements encountered in a with the papers as part of
the record, or unless it be
family law practice. A paralegal can be
made in open court and
enormously helpful in preparing for and drafting
entered of record.
agreements. This paper also contains some details
from the Texas Family Code that explain why it’s All Rule 11 requires is that an agreement be in
important to observe the required formalities. writing, signed, and filed with the court for it to be
enforceable. The purpose of Rule 11 is to
II. ATTACHMENTS. acknowledge that verbal agreements can lead to
misunderstandings and conflict, so a court will
At the back of this paper are several helpful
only recognize an agreement that is in writing.
forms and references that can be used in preparing
for and drafting agreements. Although it is a common practice to label
Rule 11 agreements, the rule itself only requires
A. Property Division Spreadsheet
that the agreement be in writing, “signed,” and
B. Informal Settlement Agreement filed. Caselaw shows that even a series of emails
can be an enforceable Rule 11 agreement. See
C. IRS Alimony Requirements
Padilla, 907 S.W.2d at 460; Cunningham v.
D. Creative Possession Schedules
Zurich Am. Ins. Co., 352 S.W.3d 519, 529
E. Parenting Plan Form (Tex.App.--Fort Worth 2011). Tex. Bus. &
Com.Code § 322.007 makes electronic signatures
F. Property Division Form
just as valid as normal, handwritten signatures:
G. Marital Agreement Waiver of Financial
LEGAL RECOGNITION OF
Disclosure
ELECTRONIC RECORDS,
ELECTRONIC SIGNATURES, AND
III. DIFFERENT TYPES OF AGREEMENTS.
ELECTRONIC CONTRACTS.
In a family law practice, there are different
(a) A record or signature
types of agreements that accomplish different may not be denied legal
purposes. For day-to-day tasks, a more informal effect or enforceability
Rule 11 agreement will be sufficient, while to solely because it is in
settle a whole case, an attorney will want to use an electronic form.
informal settlement conference agreement or a (b) A contract may not be
mediated settlement agreement. The agreements denied legal effect or
are enforced in different ways, and selecting the enforceability solely
right form of the agreement can be critical. because an electronic
record was used in its
A. Rule 11 Agreements
formation.
The most frequently used agreements are (c) If a law requires a
Rule 11 agreements. These agreements can record to be in writing, an
formalize the many day-to-day agreements that electronic record satisfies
arise in a family law practice, for example, the law.
extending deadlines, agreeing to dates, or (d) If a law requires a
resolving discovery issues. “Rule 11” is actually a signature, an electronic
very short and simple rule contained in the Texas signature satisfies the
Rules of Civil Procedure which says: law.
AGREEMENTS TO BE IN WRITING If there is a signed writing (or series of emails)
that contains all the relevant terms, it can qualify
Unless otherwise provided
as a Rule 11 agreement. The requirement that the
in these rules, no
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agreement contain all material terms means: agreement is not the best way to memorialize a
“there must be a written memorandum settlement of an entire case. It is better to use an
which…contains all of the essential elements of informal settlement conference agreement or
the agreement, so that the contract can be mediated settlement agreement, to which special
ascertained from the writings without resorting to rules apply, allowing a court to enter a final
oral testimony.” See Padilla, 907 S.W.2d at 460; judgment even if a party has withdrawn his or her
Cohen v. McCutchin, 565 S.W.2d 230, 232 (Tex. consent.
1978).
B. Informal Settlement Conference
A Rule 11 is not as final and binding as a Agreements
mediated settlement agreement. A settlement
If the parties have reached an agreement in a
agreement, unless special rules apply, may be
divorce outside of mediation, there is still a way to
withdrawn by either party up until the time a
make the settlement agreement binding in the
judgment is rendered by the court. S&A Rest.
same way as a mediated settlement agreement.
Corp. v. Leal, 892 S.W.2d 855, 857 (Tex. 1995).
Tex. Fam. Code Sec. 6.604 allows the parties to
A court will not enter a final judgment based create an agreement that a court can enter
only on a Rule 11 agreement – there will need to judgment upon, even if one party later changes his
be further hearings and evidence if a party contests or her mind. These agreements are called
it. A trial court cannot automatically render a informal settlement conference agreements:
judgment on a Rule 11 agreement if a party has
6.604(b) A written
repudiated it or withdrawn consent. Davis v.
settlement agreement
Wickham, 917 S.W.2d 414, 417 (Tex. App.—
reached at an informal
Houston [1st Dist.] 1996, no writ). settlement conference is
binding on the parties if
However, a Rule 11 agreement is a contract.
the agreement:
Therefore if a party revokes consent, that party
may be subject to a breach of contract claim to (1) provides, in a
prominently displayed
enforce the agreement as a contract:
statement that is in
“Although a court cannot render a valid boldfaced type or in
agreed judgment absent consent at the capital letters or
time it is rendered, this does not underlined, that the
preclude the court, after proper notice agreement is not subject to
revocation;
and hearing, from enforcing a
settlement agreement complying with (2) is signed by each
Rule 11 even though one side no longer party to the agreement;
consents to the settlement. The and
judgment in the latter case is not an
(3) is signed by the
agreed judgment, but rather is a party's attorney, if any,
judgment enforcing a binding contract.” who is present at the time
the agreement is signed.
Padilla v. LaFrance, 907 S.W.2d 454, 461
(Tex.1995). The statute requires that the agreement contain
certain formalities. It must have a prominently
Finally, Rule 11 only applies to pending suits.
displayed statement that the agreement is not
Therefore, an agreement made before a suit is
subject to revocation. It is best to specifically
filed is not covered by Rule 11. See, e.g., Estate
mention 6.604 and to emphasize at the beginning
of Pollack v. McMurrey, 858 S.W.2d 388, 393
(and maybe even again at the end, above the
(Tex. 1993). However, even if an agreement is not
signature blocks) that the agreement is not subject
covered by Rule 11, it may well be an
to revocation:
independently-enforceable contract, and a party
may sue another for a breach of the agreement. Pursuant to Texas Family Code §
6.604, the parties to this agreement
Because it has the potential to be revoked
represent that this written settlement
later, causing further litigation, a Rule 11
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agreement was reached at an submit a revised agreement
informal settlement conference and or set the case for a
is binding on the parties. The parties contested hearing.
to this agreement, by their signatures A party can get out of an informal settlement
below, agree that the terms of this conference agreement if the party can convince
agreement are just and right and are the court that the terms are not “just and right.”
in the best interest of the child. This This is likely to be a rare scenario, but it is
agreement settles all issues between important to be aware that a party can still contest
the parties. an informal settlement conference agreement and
set a hearing asking the court to find that the
The parties agree that THIS
agreement is not just and right.
AGREEMENT IS BINDING
AND IS NOT SUBJECT TO C. Mediated Settlement Agreements
REVOCATION. A mediated settlement agreement is the most
binding and hardest-to-challenge type of
There is a sample informal settlement conference
agreement in family law. The Texas Legislature
agreement attached to this paper that demonstrates
has implemented laws specifically making it
the requirements.
almost impossible to later overturn an MSA.
Section 6.604 applies only to divorce cases –
There are two different parts of the Family
not to SAPCR cases, modification cases,
Code that authorize mediated settlement
enforcement cases, paternity cases, etc. But, if
agreements. Tex. Fam. Code sec. 6.602 applies to
you have resolved a divorce case outside of
divorce cases, and sec. 153.0071 applies to suits
mediation, the best way to memorialize the
affecting the parent-child relationship. Although
agreement is through a writing that meets the
informal settlement conference agreements are
terms of 6.604.
only binding for divorce cases, MSAs are binding
With a Rule 11 agreement, if a party revokes in both divorce and child-related cases.
consent before a judgment is entered, a court
Like an informal settlement conference
cannot enter judgment based solely on the Rule 11
agreement, the Family Code requires that an MSA
agreement. Informal settlement conference
contain certain formalities.
agreements are different. If the agreement
contains the right formalities, then a party is Divorce cases:
entitled to a final judgment based on the
6.602(b) A mediated
agreement, even if the other party contests the
settlement agreement is
agreement: binding on the parties if
the agreement:
6.604(c) If a written
settlement agreement meets (1) provides, in a
the requirements of prominently displayed
Subsection (b), a party is statement that is in
entitled to judgment on the boldfaced type or capital
settlement agreement letters or underlined, that
notwithstanding Rule 11, the agreement is not
Texas Rules of Civil subject to revocation;
Procedure, or another rule
(2) is signed by each
of law.
party to the agreement; and
However, the process is not automatic; there is
(3) is signed by the
still one way to challenge the agreement:
party's attorney, if any,
6.604(e) If the court who is present at the time
finds that the terms of the the agreement is signed.
written informal settlement
Suits affecting the parent-child relationship:
agreement are not just and
right, the court may 153.0071(d) A mediated
request the parties to settlement agreement is
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binding on the parties if section, a party is
the agreement: entitled to judgment on the
mediated settlement
(1) provides, in a
agreement notwithstanding
prominently displayed
Rule 11, Texas Rules of
statement that is in
Civil Procedure, or another
boldfaced type or capital
rule of law.
letters or underlined, that
the agreement is not Suits affecting the parent-child relationship:
subject to revocation;
153.0071(e) If a mediated
(2) is signed by each settlement agreement meets
party to the agreement; and the requirements of
Subsection (d), a party is
(3) is signed by the
entitled to judgment on the
party's attorney, if any,
mediated settlement
who is present at the time
agreement notwithstanding
the agreement is signed.
Rule 11, Texas Rules of
Both requirements are the same, and they require Civil Procedure, or another
the same formalities previously discussed for rule of law.
informal settlement conference agreements.
This language permits the court to enter a final
Therefore, if you are asked to draft the form of the
judgment on the MSA, even if a party has revoked
MSA that the parties and attorneys will use at
his or her consent to the agreement. It is very
mediation, you should be sure to include language
difficult to challenge an MSA, so it is the strongest
similar to this:
type of agreement to use to settle a case. After an
Pursuant to Texas Family Code § MSA has been signed, there are a few, rare ways
6.602 and/or § 153.0071, the parties to challenge it, but those are beyond the scope of
to this agreement represent that this this paper.
settlement agreement was reached at
D. Agreements Incident to Divorce
mediation and is binding on the
parties. The parties to this Sometimes attorneys will want to use a
agreement, by their signatures below, document called an Agreement Incident to
agree that the terms of this Divorce. This is most often used when the parties
agreement are just and right and are do not want the details of their financial settlement
in the best interest of the child. This filed in a public court record. The rules governing
agreement settles all issues between AIDs are found in Tex. Fam. Code sec. 7.006. An
the parties. agreement incident to divorce is similar to a Rule
11 agreement, or any other agreement that is not
The parties agree that THIS
an MSA or informal settlement conference
AGREEMENT IS BINDING agreement: a party can withdraw his or her
AND IS NOT SUBJECT TO consent prior to the time the court enters a
REVOCATION. judgment, and the court may not automatically
enter a judgment based on the agreement if a party
Unlike Rule 11 agreements, or other contracts,
has withdrawn consent. A second way for a party
once parties sign an MSA, the court can enter a
to prevent a court from entering a final order
final order based on the MSA, even if one of the
based on an AID is to attempt to convince the
parties has changed his or her mind about the
court that the terms of the agreement are not just
agreement. If a party later backs out of the terms
and right. However, even if a court won’t enter
of the MSA, the other party can still obtain a final
judgment based on the AID, an AID can
order based on the terms of the agreement.
separately be enforceable as a contract.
Divorce cases:

6.602(c) If a mediated
settlement agreement meets
the requirements of this
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E. Agreed Parenting Plan or Agreement Some attorneys frequently do pre- and post-
Concerning Support marital agreements, while others rarely draft them.
It is a specialized area, and if your attorney
The only way to have a binding agreement on
typically drafts these documents, she likely has her
child issues, where a party can obtain judgment
own forms.
even after the other party revokes consent, is
through a mediated settlement agreement. One form that should be used in almost every
case is a waiver of disclosure of financial
The Family Code does contain provisions
information. This document is the result of
allowing parents to reach an agreed parenting
specific language in the Family Code. The waiver
plan. See Tex. Fam. Code sec. 153.007.
should contain the following terms:
However, the Court will only enter an order in
accordance with the parenting plan if the court  That the waiver was signed before the
finds that the agreed parenting plan is in the pre- or post-marital agreement was
child’s best interest. signed;
Similarly, parties can enter into an agreement  That each party was provided a fair and
concerning child support, which a court will enter reasonable disclosure of the property or
if it finds the agreement to be in the child’s best financial obligations of the other party;
interests. See Tex. Fam. Code sec. 154.124.
 That each party voluntarily and expressly
F. Pre-Marital and Post-Marital Agreements waives any right to disclosure of the
property or financial obligations of the
Chapter 4 of the Family Code contains
other party beyond the disclosure
specific provisions for pre- and post-marital
provided; and
agreements. These are enforceable like contracts,
but they also have some special features that make
 That each party had, or reasonably could
them different from ordinary contracts. In a
have had, adequate knowledge of the
premarital agreement, the parties can agree to
property or financial obligations of the
terms regarding:
other party.
(1) rights and obligations in any property;
See Tex. Fam. Code secs. 4.006 and 4.105. These
(2) the right to buy, sell, use, or otherwise terms strengthen the enforceability of the
manage and control property; agreement and make it harder to challenge later.
The waiver must be signed by both parties prior to
(3) the disposition of property on separation,
the signing of the pre- or post- marital agreement.
divorce, death, or any other event;
A sample Waiver is attached at the end of this
(4) spousal support; paper.
(5) the making of a will, trust, or other
IV. HOW TO PREP YOUR ATTORNEY.
arrangement;
The assistance of a paralegal can be critically
(6) ownership rights in a death benefit from a
helpful in preparing an attorney for a mediation,
life insurance policy;
settlement conference, or other negotiation.
(7) the choice of law governing the Attorneys often do things at the last minute, and
construction of the agreement; and your advance preparation can make settlement go
a lot more smoothly. Paralegals can provide
(8) any other matter, including their personal
excellent support by pulling together relevant
rights and obligations, not in violation of
documents in a notebook for settlement
public policy or a statute imposing a
discussions. The following types of documents
criminal penalty.
are especially useful:
However, parties cannot use these agreements to
Relevant Facts
negatively impact the rights of their children to
receive support.  Credit reports – pulling the parties’ credit
reports prior to the settlement discussions
5
can help uncover debts that the parties may critical piece of information that needs to
not have listed be in the notebook. Also, if any temporary
orders or relevant agreements have been
 Supporting documents – copies of bank
entered in the case, then they should be
statements and other documents directly
included.
from financial institutions showing the
current amount of any assets or debts can Proposed Agreement
help resolve disputes. It is best to get these
 Draft agreement – If your attorney is
documents as close to the negotiation as
attending a mediation or settlement
possible, but at least by the day before so
conference, she may want to start out with
that the attorney has a chance to review
a draft agreement already prepared in
them.
electronic form. This is helpful so that, at
 Relevant appraisals/valuations – if the the end of a successful negotiation, the
parties have had appraisals done of any process of producing a final agreement to
property or businesses, then those need to sign is faster.
be included in the notebook. If no formal
 Form language regarding specific terms –
appraisals have been done on property,
if you know certain issues exist and will
including the tax appraisal on any real
have to be addressed in the decree, arm
estate can be helpful.
your attorney with the form language, so
 Spreadsheet – Once you have bank that it can be attached to the agreement.
statements, inventories, credit reports, or This will make your life easier when it
other documents showing the value of the comes time to draft the final order. An
parties’ property, you can prepare an Excel example is stock options – when I know
spreadsheet that can greatly increase the that these are an issue in the case, I always
ease and speed of forming and responding want to bring my standard stock option
to offers. A sample spreadsheet attached language with me to the negotiation.
to this paper lists the property and shows
the total assets to each party, total debts to V. PROPERTY AGREEMENTS.
each party, and percentage division.
In a divorce, the property division is final and
cannot be modified later. Therefore, it is
 Original deeds and deeds of trust – if real
important to be detailed, specific, and accurate in
estate is an issue in the case, then a formal
drafting the settlement agreement and the decree.
property description and information from
In advance of the settlement negotiations, it’s
the original deed will be needed to draft
helpful if the paralegal can prepare a spreadsheet
the decree and any deeds or deeds of trust.
or other list of the property that contains the
Our local counties have websites where
financial institution, account number, the name the
you can search and pull PDFs of the actual
property is held in, the approximate amount of the
deeds and deeds of trust so that the decree
account, a description of the property, etc. That
and closing documents can be accurately
way, the agreement can identify each item
drafted.
specifically, and there won’t be later disputes over
Pleadings and Offers
a vague or ambiguous item.
 Previous offers – if the parties have
I have included, as an attachment to this
exchanged written offers, then it is helpful
paper, a Travis County district court form for a
to have these in the notebook
checkbox-style property division order. In a
pinch, it can be used to make sure issues are not
 Inventory & Appraisement – if the parties
overlooked.
have exchanged inventories, then each
party’s latest inventory needs to be A. Property and Debts
included in the notebook
Clients sometimes don’t understand
 Prior orders, including temporary orders – everything that can be divided in a divorce. It can
In a modification case, the last order is a be helpful for a paralegal to sit down with a client
6
and discuss all the types of property that can be 37.5% of the new balance, or should she just get
divided – bank accounts, investment accounts, $3,000? Drafting a specific settlement agreement
retirement accounts, houses, cars, life insurance, can avoid these types of disputes.
valuable items of personal property, etc. Clients
With debts, it is also important to identify the
are also often confused about community
asset that the debt is associated with. For
property. It’s common for them to only list “their”
example, if a certain loan is a car loan, identify the
property (the property that’s in their own name).
car it is associated with. Generally parties are
You need to remind them that all property needs
assumed to take debts associated with property
to be addressed in the divorce. Sitting down with
they receive in the divorce, but it’s always better
a client before a mediation or settlement
to be explicit. Further, get clarification from the
negotiation often results in the client remembering
client on exactly whose name the debt is in. If
a few more things that should be included. If it’s
wife is taking the car and car loan, but the debt is
possible to get the client to come in to the office in
in joint names, then wife will need to get a power
person prior to a settlement negotiation, it’s very
of attorney from husband authorizing her to take
helpful.
actions with the car and loan. Being clear on
Whether you’re preparing a spreadsheet for whose name each asset and debt is in will let you
mediation, putting together the first draft of a know what closing documents will need to be
settlement agreement, or drafting a decree, it’s prepared.
important to include as much information as
B. Closing Documents
possible to describe the property. This will avoid
problems later. For example, if you look at the It is always best to get necessary closing
spreadsheet attached to this paper, I try to include documents executed before the court enters the
the financial institution holding the account, the decree. That’s when you have the clients’ focus,
last four digits of the account number, whose and if it doesn’t get done then, it frequently won’t
name the account is in, and the amount. get done at all. As you prepare for settlement,
Sometimes I will include the date the amount was start thinking about what documents the clients
determined, because if it was a few months ago, will need in addition to the decree. These
we might need to get an update at the negotiation. documents can include:
The inventory and appraisement form contained in
 Special warranty deed – if the house is in
the Texas Family Law Practice Manual has blanks
joint names, but one party is keeping it
for the client to provide all of this information to
you. Encouraging the client to start early on their  Deed of trust to secure assumption – if
inventory and be thorough in describing their both parties will be remaining on the
property will make your life easier. mortgage even though one party is taking
the house
Listing details for each item of property,
beginning with your earliest draft, will help the  Power of attorney to transfer motor vehicle
parties and attorneys catch mistakes and reach – if both spouses are on a car title or car
more accurate settlements. Here is an example of loan that one spouse is keeping
a detailed listing for a financial account:
 Child support withholding order
Chase checking account ending 1234, in
There are many types of closing documents that
the name of husband, with an approximate
could be needed, and form documents are found in
balance of $5,100.00 as of Aug. 25, 2012.
the Texas Family Law Practice Manual or ProDoc.
Sometimes the parties will agree to divide an
The settlement agreement can address what
account. It is important to specify whether a party
documents will be needed, as well as who is
is getting a percentage of the account or a lump
responsible for preparing them. Keep a checklist
sum out of the account. For example, say the
of the closing documents you will need as you go
account balance shown on the settlement
through the case. That way, nothing will be
spreadsheet is $8,000, with husband taking $5,000
missed in the rush to get all the documents
and wife taking $3,000. If, by the date of divorce,
finalized.
the account is now at $10,000, should the wife get
7