It’s rare for divorces to go well, and even fewer end without serious asset issues. 

Real estate is typically the most valuable asset in most relationships. No matter whether it’s a marital residence or an investment property, many divorcing couples are curious about what happens to their real estate after their split.

Generally speaking, when it comes to divorce and property, the family home is the most essential and valuable asset that a divorcing spouse possesses.

Consequently, it is critical to negotiate an agreement on the partition of equity and/or revenues of the matrimonial property before the marriage ends. Continue reading to see how a property settlement agreement might be beneficial.

What is a Property Settlement Agreement and How Does It Work?

In a divorce, a property settlement agreement is reached.

A property settlement agreement, in its most basic form, refers to the portion of a financial settlement between two divorcing parties that deals with any property that needs to be divided between the ex-spouses once the divorce has been finalized.

Most of the time, the property that needs to be divided consists just of the matrimonial home (i.e., the place where the husband and wife lived throughout the marriage), although it might occasionally include second houses and investment property that is either jointly or individually held.

How is property distributed after divorce?

There are numerous approaches that may be used to accomplish a divorce house split, but if you and your spouse are unable to come to terms on how to proceed, it may be necessary to seek professional assistance.

How do you prepare a property settlement agreement?

When putting together a property settlement agreement, there are numerous steps to take:

Step #1. Negotiation – the divorce couples must first determine how to divide any marital property. This can be done informally or through impartial specialized mediation.

Step #2. Agreement – once established, an agreement is usually formalized in a paper, with both sides signing to acknowledge their agreement. All other financial matters and property are usually included in the total agreement (sometimes called a divorce settlement).

Step #3 Consent order – To make the settlement enforceable, it must be made into a consent order.

If the divorcing parties are unable to reach an agreement on a financial settlement by themselves or through mediation, they may be forced to go to court so that a judge can determine what is a fair financial settlement in their divorce.

In this case, the court will begin by assuming a 50:50 split and then apply principles of fairness in light of the specific circumstances at hand. This includes the welfare of any children under the age of 18, as well as numerous other factors set out in Section 25 of the Matrimonial Causes Act 1973, such as, for example, the financial situation of the parties.

  • the income, earning ability, property, and other financial resources that each of the marriage’s parties has or expects to have in the near future
  • the financial requirements, duties, and responsibilities that each of the marriage’s participants has or is anticipated to have in the near future
  • the family’s standard of living prior to the collapse of the marriage
  • the ages of each married partner and the length of the marriage

The court’s judgment will result in the creation of a divorce decree, which will include specific instructions on how any property will be distributed between the parties.

What should be in a property settlement agreement?

It is essential that the element of a divorce settlement that deals with property has explicit directions on how the assets should be distributed between the divorced couples. The following are examples of possible property divisions:

  • Selling up entails disposing of any property that is part of the marital estate and distributing the revenues among the spouses and children.
  • Buying out the other party in a divorce includes one of the divorcing parties purchasing all of the equity in a property or taking on the entire debt.
  • Alternatively, one party may decide to transfer ownership of the property to their ex-partner while continuing to pay their half of the mortgage, either for a specified period of years or until the entire mortgage is paid off.
  • Transfer of ownership – As part of the overall financial settlement, any property that is not subject to a mortgage may be transferred between the parties.

Can I use sample property settlement agreement templates or forms?

The usage of a template divorce agreement form is generally not recommended due to the fact that each divorce has its own set of unique variables to consider.

Instead, you should hire a team of professional divorce lawyers to write a bespoke property settlement agreement that takes into consideration your unique situation in terms of property and other assets.

What is the difference between property settlement agreements and consent orders?

As previously stated, a property settlement agreement is a component of the broader financial settlement process. A financial settlement, on its own, just defines the parameters of the agreement between the divorcing parties; it is not legally binding and does not result in a clean break between the parties (although it can be used as evidence in court).

A consent order effectively gives legal standing to the financial settlement, which means that any agreement respecting the property and other assets can be enforced in the courts after it has been approved by the court.

A consent order also bans one party from bringing financial claims against their former spouse in the future, allowing for a clean split in the relationship.

Bottom line

The idea behind the property settlement agreement is to make sure that both parties are on the same page about the details of finalizing their separation. The more information you have, the easier it is to avoid any disagreements in the future. So if you ever think that your marriage is going to fall apart, one of the most important things you need to do is protect yourself by drafting an agreement with your spouse on the partition of assets.