How a separation agreement can make divorce less terrible

Having a separation agreement before officially filing for divorce will make it easier once you go to court.

Myelle Lansat

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Myelle Lansat

Myelle Lansat

Editor

Myelle Lansat is a personal finance editor at Policygenius. She writes and edits the Easy Money Newsletter.

Published May 12, 2021|4 min read

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Getting a divorce is never an easy decision, but there are ways to make the process a little easier. The best way to protect your wealth and avoid conflict is getting a prenuptial agreement. If you didn’t, you still have options for a clean separation.

Take Bill and Melinda Gates for example. The couple announced their divorce this month. They didn’t have a prenup. Instead, they drafted a separation agreement to divide their assets. A separation agreement worked because they mutually agreed to get a divorce, said Paul Rudder, a New York City divorce lawyer. 

If you don’t have a separation agreement before filing for divorce you can expect to pay anywhere from $15,000 or more to get divorced. It can cost significantly more if children are involved or a massive fortune is at stake. 

Ironing out a separation agreement before officially filing for divorce will make it easier once you go to court. Here’s what a separation agreement is and how it compares to other divorce contract options. 

What is a separation agreement? 

A separation agreement is a written document that divides a couple’s assets in preparation for a divorce. Conditions are baked into the document to make sure each person holds up their end of the agreement, said Rudder. 

“It has to be mutual from each side and both have to give something of value,” he said. 

The process lets you separate shared property without involving the courts. Assets are anything that has monetary or spiritual value, said Rudder. That may include property, bank accounts, pensions, investments, art, businesses. It would also include a custody agreement and any additional support needed for children under the age of 18.   

Dividing assets isn’t as simple as splitting everything down the middle. There are a number of considerations that go into a separation agreement, said Rudder. Take the Gates’ agreement. The couple likely own stock, so they need to consider whether they’ll divide it equally or buy the other person out. They’ll also have to weigh the capital gains tax implications, he said.  

Once you find a middle ground and sign the separation agreement, you can officially file for divorce in court. Because you’ve taken the time to iron out the details, the court proceedings become relatively simple, said Rudder. A judge will review your agreement and likely grant the divorce if there’s no contest. 

Other divorce contract options

The biggest difference between prenuptial, postnuptial, separation and property settlement agreements is when they’re drafted. For the most part, they all spell out how a couple’s assets will be divided in a divorce. Couples make a prenup, postnup and separation agreement before filing for divorce. A property settlement agreement is similar to a separation agreement but happens after filing for divorce. Here’s a breakdown of each:

A prenup is a written separation contract that’s created before you get married. It has two functions: protecting your pre-marriage wealth and how you want to divide assets if you get divorced.

A postnup can be drafted after you’re married. It outlines how you want to divide assets if you choose to get divorced. The biggest difference between a postnup and a separation agreement is you don’t have to get divorced if you draft a postnup. 

A property settlement agreement, also called a marital settlement agreement, is an option after you file for divorce (if you don’t have any other contracts). You will go through the same motions as a separation agreement, but writing it can be more contentious — especially if you or your partner want to fight the divorce. You can write your own agreement, but you may want to consult a lawyer.  

How to choose the right document for you

The paperwork that will ultimately be filed when you get a divorce will depend on your relationship with your partner.  

It can be difficult to ask your partner for a prenup before getting married. Explain to your future spouse that a prenup doesn’t mean you plan to get a divorce, but in case you do, it will save both of you money and emotional anguish. 

If you’re already married but feel like the relationship is on the rocks, drafting a postnup is a good way to set expectations before you start hating each other, said Rudder. 

Divorce can be a life-changing move for a couple. If it’s a mutual decision, drafting a separation agreement will make the court process easier if you decide to get divorced. It can also save your family from more emotional stress if you and your partner agree from the get-go, said Rudder.  

Image: Marko Geber / Getty Images

Myelle Lansat is a personal finance editor at Policygenius. She writes and edits the Easy Money Newsletter.