What constitutes a separation agreement in the state of Indiana?
A separation agreement in Indiana is a written stipulation signed by both parties to a marriage with the intent to settle the rights of the parties while they remain married. Such agreements are governed by Indiana Code Section 31-15-2-17 which provides that "[a] court may approve at any time a written agreement voluntary executed between the parties to a marriage regarding any matters between them, including child custody, child visitation, property division, and spousal maintenance which the court may approve under this chapter. The court may incorporate the terms of an agreement approved under this section into the decree of dissolution of marriage without receiving evidence."
There are several types of "separation agreements". There are those entered by a court during the pendency of a divorce proceeding, those that are "conditional" (for example, with every provision intended to take effect only once a divorce is granted, and not before) and those entered before the marriage has been legal dissolved.
Despite the legal requirements (or lack thereof) for "separation agreements", the term separation agreement generically refers to a contract between spouses that seeks to resolve all or a portion of the incidental issues that accompany the dissolution of a marriage. This can include such things as the distribution of marital assets and liabilities , spousal maintenance, the disposition of personal property (including personal papers, and documents), and provision for children. Generally speaking, separation agreements resolve all issues prior to a final decree of dissolution of marriage (divorce). Once signed by both parties, a separation agreement may be presented to the court for it to incorporate into its final decree of dissolution of marriage. In such an event, the separation agreement will become binding upon the parties and included in the final decree of dissolution. Indiana Code Section 31-15-2-17.
A separation agreement is similar in many ways to other contracts. It contains the "seven essentials" of a contract, and certain representations and/or warranties. While a typical separation agreement will provide for the resolution of issues therein, it must also contain a "separation agreement disclaimer." Such a disclaimer notifies the parties of the fact that if either party attempts to enforce any right or obligation set forth in the agreement while the divorce is pending (assuming there is a pending divorce) such action may be futile, illegal and/or considered contempt of court.
Required Elements of Indiana Separation Agreements
When creating a separation agreement, it’s important that spouses understand the key components that must be included. Consider the following:
Division of Property & Assets
Separating spouses must outline the division of their assets and property. In most cases, this will entail a fair division of real property, furnishings, vehicles, and other items that belong to each spouse. In Indiana, assets acquired after the date of separation, as well as gifts and inheritances, typically go solely to the recipient spouse.
Debt Division
Just as your separation agreement should clearly state how all property and assets are divided, it should also address how you and your spouse agree to divide your debts. If your spouse is fully responsible for the home, you and your divorce attorney should make provisions to keep the home in your name so you’re not liable for the mortgage or any taxes after the divorce is finalized.
Child Custody and Support
The next most critical portion of your separation agreement involves your children. If your children are still minors, the terms of custody and child support must be addressed in detail. For example, a separation agreement must:
Spousal Maintenance
Your final separation agreement should also address the issue of spousal support (maintenance). Many times, judges will incorporate terms of maintenance into the final divorce decree. Regardless, many couples decide that spousal maintenance is not necessary.
A separation agreement must clearly stipulate the conditions of the divorce. Too often, terms are vague, and circumstances change. In some cases, an Indiana judge will not approve a separation agreement if it lacks sufficient specificity.
Essential Criteria for Voluntary and Enforceable Execution
A separation agreement must be in writing in order to have been effective in settlement of the marital estate. Oral settlement agreements are not enforceable – e.g. Hemrich v. Hemrich, 823 N.E.2d 1210 (Ind. Ct. App. 2005), but they are evidence of the terms of an agreement and may be incorporated into a subsequent written separation agreement, and therefore honored.
The signed written agreement should be presented to the court for approval, once its terms have been agreed upon by the parties. The agreement should then be incorporated into the court’s final decree through a "divide, conquer and conquer" fashion (i.e., part of the decree adopts the terms of the agreement, and part of the decree incorporates the agreement into the final decree). See Ind. Code 31-15-2-12.7(a). The agreement serves as the parties’ contract and provides the terms for property division and child support. Note however, if the parties have children and agree to divide their own personal property, but not marital property, the court cannot approve that agreement because it is the state policy that the court must divide the parties’ marital property.
Although agreements regarding the support of children must be in writing and signed, the terms of support can be entered into the decree even when not yet in writing. For example, if the parties agree on the amount of child support a parent is to pay, but do not put that term in the final decree, the court may enter that term into the decree.
Preparing and Negotiating the Separation Agreement
The drafting and negotiation of a separation agreement in Indiana typically begins after the couple has reached some level of consensus on how they would like to divide their assets and liabilities and how they would like to address any children that they may have. After the parties reach agreement, the family law attorneys involved will generally get involved. A standard practice in these situations is to have the client and their attorney meet in order to discuss the details of the Indiana Financial Declaration, which is a form created by the Indiana Supreme Court. This Declaration is a comprehensive financial source document that allows a party to detail his or her respective assets, liabilities, income, and expenses. The Declaration creates a foundation for the attorneys involved in the case to value the parties’ property, including assets and debts, evaluate the parties’ cash flow, address alimony if available under the circumstances, and determine child support. The terms and conditions of the Indiana Financial Declaration are established by Supreme Court Rule and all family law attorneys in Indiana should be familiar with it. As such, the financial information requires no further explanation.
The Indiana Mediation Rules require the mediator to meet with the parties and their respective attorneys, in order to help facilitate a settlement agreement. In most instances, the parties provide the mediator with some information, as to the factual issues requiring resolution. However, it is not uncommon that the parties do not understand the rules in Indiana or have been exposed to certain valuations of assets or issues involved in the case. The mediator will outline the relevant laws and its application to the issues in the case. This process allows the parties to engage in an informed and educated discussion regarding the merits and demerits of their positions in negotiating the separation agreement. We find this process to be very productive, especially in separating emotionally charged individuals. Also, the mediator assists in valuing the asset or addressing the issue. The mediator provides a recommendation, but does not suggest a specific dollar amount, rather, shares with the parties the range of acceptable values. The Mediator is not acting as an attorney in this role, but works to facilitate settlement.
Prior to drafting the final separation agreement, we will prepare a "Case Summary" and review it with the client. The Case Summary displays the fundamental issues in the case, a recommendation of the mediator for the result that he/she believes is most equitable, and, if known, the last proposal give by the other party. This Case Summary is also provided to the client’s spouse and their attorney in order to attempt to engage them in a focused discussion to discuss the case.
This process educates the client, provides an understanding of the potential outcomes, and prepares the client for a knowledgeable discussion with the other party in order to attempt to finalize the terms of the separation agreement.
The separation agreement is drafted and forwarded to the client to review and compare with prior drafts and to determine if any changes are necessary. If a typographical error is discovered, the minor grammar issue is resolved and a new draft is generated. If there are substantive changes, we will meet with the client to review the Agreement, providing guidance, if necessary, as to the merits or demerits of the proposed change and its impact on a fair and reasonable agreement. The client then provides us with instructions as to what, if any, changes should be made.
In most cases, after some revision of the separation agreement, the couple will formally sign the document, enter into a "case settlement conference," and appear at court with their attorney to finalize their agreement. The judges in Indiana will require that the couple openly and freely declare to the judge that all of their questions were answered by their attorney, all documents provided to the court were fully reviewed, they are independently represented, and they each believe the terms and conditions of the separation agreement are just and reasonable.
Processing and Execution of Separation Agreements
In order to be enforced, a separation agreement must be filed with the court and incorporated into your final divorce decree. In Indiana, there is a specific legal proceeding through which you can do this. Once the agreement is incorporated, a party could seek enforcement if the other party refuses to abide by the terms. If enforcement fails on that basis, a party could still seek to reopen the divorce and have a separate section added to the order specifying the enforcement mechanisms available. However, such a reopener would be fraught with potential issues. Another potential problem with separation agreements is that they often specify actions that must or must not take place in the future. For example, a periodic payment of alimony or maintenance can be hard to enforce. Of course, you can make provisions in your agreement specifying what exactly will happen if a payment is missed .
What will the judge ask you to do if your spouse fails to pay an alimony or maintenance payment? Typically, the judge will order either an additional hearing or a series of hearings over time, depending on the circumstances. You may be able to work out a deal to avoid going all the way through the entire enforcement process, but then you have to trust your spouse to actually make the payments. Keep this in mind: missed alimony or maintenance payments are considered debts owed to you by your spouse, so the usual process for enforcing debt collections, wage garnishments, etc., can typically be applied. One potential issue that is occasionally overlooked is that a Secretary of State in Indiana is allowed to enter a lien against the assets of a debtor who owns a business in the state. There is a very specific procedure the Secretary of State has to follow, and the right type of hearing must occur before a lien can be registered.
Amending an Existing Separation Agreement
Under Indiana law, a separation agreement may be set aside or modified for several reasons. Typically, these reasons can be broken down into four basic categories:
- Mutual agreement of the parties
- Change in circumstances
- Fraud or Misrepresentation, or
- Invalid or Unconscionable Contract
Unless a separation agreement contains specific modification language, it cannot normally be modified unless all parties to the agreement agree to the modifications. For example, a statement in the agreement which reads: "This agreement cannot be modified except by written agreement…." would typically be binding unless the parties agree otherwise.
If a change in circumstances occurs, it may form the basis for a modification to a separation agreement. The burden of proof will be on the party seeking the modification to prove that the change in circumstances rises to the level requiring a modification; for example, this may be a change of employment resulting in a significant increase or decrease in salary, or perhaps a medical emergency.
In the case of a fraud or misrepresentation, the party seeking to set aside the agreement bears the burden of proof of proving the fraud or misrepresentation occurred. If the existence of fraud or misrepresentation is proven, the separation agreement may be set aside or modified as the court deems appropriate.
An unconscionable separation agreement may also be set aside. Again, the burden of proof is on the party seeking to set aside the agreement to prove the agreement is unconscionable. This is usually defined as grossly unfair and is typically a difficult burden to meet.
Separation Agreement and the Divorce Decree
A separation agreement that you have executed and filed in your case runs with the divorce decree. That means that the terms of the agreement are enforceable post-divorce so long as they have not been modified by the decree or subsequent findings of the court.
Pre-Decree Agreements
A pre-decree separation agreement remains in effect until amended or incorporated into a couple’s divorce decree. If you separate from your spouse, but do not go through with a divorce, your agreement should not be incorporated into any future divorce decree unless stipulated to by both parties. If you go through with a divorce, and your agreement is incorporated into the final order, the terms of your agreement then become fully binding and enforceable.
Post-Decree Agreements
With a few exceptions, a written agreement executed after your divorce has been granted generally is deemed to be valid and enforceable by the court. While it is generally not required for such agreements to be filed with the court, they can always be filed as evidence of the terms of an agreement. It is best practice to file them to create a public record.
When Separation Agreements Become Binding
The general rule is that a separation agreement becomes binding and enforceable upon execution and filing. The only exception to this involves a separation agreement that is executed, but not filed with the court, and never becomes part of a divorce decree. In such situations, the agreement will remain enforceable by the parties until deadlocked on a future claim.
Suppose parties execute a separation agreement, but then decide not to divorce. Six years later, one of the parties decides it wants to go to court and try to enforce the agreement. The Indiana Court of Appeals has held that the statute of limitations period for enforcing a separation agreement under these circumstances is six years. If the agreement is sought to be enforced after six years, it becomes stale and unenforceable. The reasoning is that the court’s equitable power has been exhausted and the parties should resolve the matter themselves.
If parties execute a separation agreement and file for divorce, but there is a period of time between the execution of the agreement and the granting of the divorce, the court may enforce it in its own right. Thus, if you have a non-appealable claim against your spouse with a time limitation (i.e., emotional distress, etc.), you should file for divorce and obtain a decree to ensure the court’s ability to enforce the agreement.
Common Pitfalls to Avoid
Common Mistakes to Avoid in Indiana Separation Agreements
Separation agreements in Indiana are often executed by individuals who are going through or have already completed marital dissolution in Indiana. They frequently mischaracterized as waivers of spousal maintenance or agreements not to exercise certain visitation or parenting time rights. While it is generally advisable to have a separation agreement prepared no matter what form of divorce is being pursued, many clients rush into agreeing to one without knowing the consequences and this can end up having a negative impact on particular terms of a decree or the ability to modify its provisions down the road.
One of the more common mistakes is using a separation agreement to waive spousal maintenance or an award of child support. While a waiver of the right to spousal maintenance is permitted by Indiana law, it is very likely that any attempt to do so will not be effective unless both parties are legally separated under Indiana law. Indiana Code § 34-55-6-2 authorizes an agreement to waive spousal maintenance "made after the commencement of a proceeding separating the parties."
A line of recent Indiana appellate opinions has held that the phrase "separating the parties" means actually obtaining a legal separation. Similar to the requirement of legal separation for the court to have jurisdiction over a child custody proceeding, I. C. § 31-17-2-1, Indiana trial courts have held that a separation agreement must be entered as part of a legal separation proceeding for any provision waiving spousal maintenance to be enforceable . Without that specific step in the case, the separation agreement, including any waiver of spousal maintenance, is largely unenforceable and may be set aside or ignored by a court on that basis alone.
Of course, the court may be able to retain jurisdiction over spousal maintenance after entry of the final decree if there are issues related to property disposition claims pending in the case, and a separation agreement may be particularly useful as a result.
Another frequent issue is lack of consideration for the terms of both parties’ respective estate plans. For example, one party may have certain provisions in a will or trust for the benefit of the other spouse in the event that the spouse predeceases that party. It is also common for a former spouse to be named as beneficiary of both a life insurance policy and retirement plan. The separation agreement only addresses these terms with respect to the provisions of an Indiana divorce decree, but arguably is ineffective in changing the terms of the will or trust that is at issue. Further, the decree itself ultimately may not be effective until the separation agreement is entered as an enforceable judgment. Because Indiana requires dissolution provisions to be merged into a court decree, interlocutory orders may not be enforced after the final decree is entered.
It is important to understand what a separation agreement can and cannot accomplish, some specific features of the agreement, and when it may not be enough to achieve all the goals of the parties.