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Family Law Agreements: Effective Drafting Requires Experience and Precision By A Family Law Lawyer

A Marital Settlement Agreement (MSA) can be a useful tool or a serious problem for one or both parties upon being finalized by the Court in a Final Order. The Family Law Lawyer must take great care in the drafting.

Many people are surprised by the length and detail of a well-drafted MSA.  Another frequent surprise:  the unintended, and often unfair, consequences of drafting errors made by a Family Law Lawyer for a client who thought their MSA represented a fair deal.

Consider this example involving division of retirement monies:

In an unpublished opinion on June 3, 2015 in Marshall v. Marshall, the South Carolina Supreme Court ruled on the division of 2 retirement accounts that were in dispute. The Marshalls had agreed that they would “equally divide husband’s Bechtel Pension and 401(k) account”.

It seems clear that the Husband owned 2 different kinds of retirement accounts. Their 401(K) was a defined contribution plan and the Bechtel account was a pension. While the current value of a 401(K) can be determined by looking at a statement, the present value of a pension is more difficult to figure, but the Family Law Lawyer who drafted the agreement made no such distinction:

The Marshall’s Agreement effectuated the “equal” division of husband’s Bechtel Pension and 401(k) account by stating that “…the husband shall transfer the sum of $273,975.00 to the wife by virtue of either a Rollover IRA or a QDRO (Qualified Domestic Relations Order).”

The Family Law Lawyer did not identify anything in the Agreement specifying the account from which the funds would be transferred or if this sum represented an equal division of “…husband’s Bechtel Pension and 401(k) account”.

After receiving the 401(K) transfer, Wife’s lawyer then submitted another QDRO for division of the Bechtel pension. Husband objected and stated that the QDRO already submitted was all he was required to do by way of the Consent Order.  The Supreme Court agreed and stated that “(w)hen husband paid wife $273,975.00 by way of the rollover IRA, pursuant to the Consent Order, he satisfied his obligation under the March 28, 2005 Final Order. There is no basis for the QDRO and equity demands that it be vacated”.

In effect, Wife lost half the value of Husband’s Bechtel pension because the Consent Order did not clearly identify the accounts to be divided and how the division would be accomplished.  MSAs, especially those including division of retirement accounts, must include clear identification of each asset and precise instructions for disposition of each.

How much did Ms. Marshall lose here?  To know that, we would multiply the amount of the monthly annuity (that she would have received from the Bechtel pension) by the number of months in her life expectancy.  Half of a pension, or monthly annuity for life, is not usually something you want to leave on the table.

Family Law clients are particularly vulnerable to problems from drafting errors.  Usually they are evaluating and deciding questions they have never before considered. Experience is a great teacher, and usually it is the attorney who has experience with multiple divorces, not the client.  Drafting can have positive or negative consequences on issues of custody and communication as well as finances. The attorney must ensure that the MSA is clear and specific.  All parties should be able to read and understand the document (with some guidance) and no question should go unanswered.

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