A “Separation Agreement” in a divorce should really be called a “Settlement Agreement”. Don’t let the word “separation” confuse you. In Colorado, the Separation Agreement is the document that contains the terms and conditions of the divorce with regard to the division of the assets and debts of the marital estate. The Separation Agreement is basically “who got what in the divorce”. The Separation Agreement typically does not include anything about custody or parenting time plans. Those matters are reserved for inclusion in a “Parenting Plan”—where the details of how the Children will be raised by two Parents not living together are specified in detail.
A Separation Agreement only occurs when the Parties settle matters. When the Separation Agreement contains all the matters between the Parties and is a complete settlement of everything between the couple, it allows the divorce to be granted by filing paperwork. No Court Hearings are held and no disputes or financial battles need to be waged. A partial Separation Agreement addresses the matters that have been settled, but by definition means the Court will have to hold a hearing to determine the issues that have not been settled.
Some of the many matters addressed in the Separation Agreement include the house, the retirement funds in an IRA, the cars, the bank accounts, the RV, the credit cards, the business(es), the investment accounts, the timeshare, the season tickets, the household furniture and kitchen supplies and yard tools. The Separation Agreement may also set forth the legal obligations of each Party and can include remedies for violating the legal obligations—such as contempt of Court actions or indemnification by the violating Party. Termination of certain obligations under a spousal relationship (like inheriting upon the death of the other) can also be set forth so each Party understands the future landscape.
There are two basic approaches to drafting a Separation Agreement: lots of detail and specification or little detail and barely a mention of legal obligations. Some attorneys like to only use broad strokes, don’t include a lot of detail about property or debts, and barely mention future obligations and termination of obligations. Such agreements can work when the Parties get along and will cooperate with each other as future issues arise. Other attorneys, like Jeanne M. Wilson of The Law Office of Jeanne M. Wilson & Associates, PC, try to include as much information as possible so there will be no misunderstandings—or if a misunderstanding arises, there is enough information in the Separation Agreement for a resolution to be found.
Not including detail leads to a weaker agreement and the disincentive of Parties to cooperate. Trying to recreate the facts everyone knew when the settlement agreement was made, becomes more difficult with time. For example, trying to recall what was supposed to happen with a joint credit card account can be a blur of confusion among all the other post-divorce tasks required. The more details of the credit card account that are listed and the circumstances surrounding its division, the more likely the Parties can use the information when challenges arise.
Specifically listing the name of the credit card and last 4 digits of the account number, the approximate balance of the card at the time of the agreement, whether it is a joint or individual card, and if a joint card how and when it will be closed, whether additional charges can be placed on the card and by which Party, will provide future guidance to a Client who is trying to recall the specifics among so many details of the divorce. Including provisions for joint credit card holders to share passwords and log-in specifics may be advantageous in certain situations where the Parties are working together or need specific updated information.
If a joint credit card is going to be paid off by one Party, the reason for that arrangement can be included so both Parties recall why it was done (In exchange for lesser spousal maintenance paid? To equalize the assets and debts? etc.)
Including all the property of the marital estate in the Separation Agreement means including all the property—even when one Party was hoping the other may not know they are entitled to share in that property. Difficulties arise when the Separation Agreement does not include provisions for the awarding of a material asset to a Party. Did one Party hide that asset? Did the other know they were entitled to have it included in the marital estate and divided?
Colorado has a 5-year look-back provision where a case can be reopened within 5 years of the divorce and the assets reassigned and distributed if one Party failed to disclose a material asset. This is why even when a Client requests the attorney not mention an asset in the Separation Agreement, the attorney must refuse. One common example is a pension or retirement account that the other does not know about or to which they believe they have no entitlement.
Failing to include the pension/retirement in the Separation Agreement, can open the door to the entire case being revisited within 5 years. Another example of failing to disclose a material asset occurs when a business is valued low at the time of dividing it in the divorce, but shortly after the divorce is granted, the business takes off or is sold many times over the value it was given in the divorce.
The reopening of the case can present a significant financial dilemma as it often carries allegations of fraud placing the non-disclosing Party at a disadvantage with the Judge and the Court system. Proceeding through a case where the Judge knows you lied or committed fraud, will make your case more difficult and success less likely.