Marital Settlement Agreements That Divide Property Are Valid When Signed Even If Divorce Judgment Comes Later

Most divorce cases settle.  They don’t go to trial.  A common approach to settlement is bit by bit. The parties obtain temporary orders on child support and child custody, then work on the division of their community property assets.  Often the parties enter into a marital settlement agreement (MSA) which sets out the agreement which will eventually be incorporated into the judgment of dissolution (also known as the judgment of divorce).

But,  the parties need to understand that the MSA is itself an enforceable contract. Unless an MSA specifies that it will be binding only with court approval, that approval is not necessary to make the MSA valid and enforceable.  This means a property division under a MSA is valid and binding when signed. This can be of particular importance for business owners.  Fam Code Section §916(a),  states property received by a non-debtor spouse after a property division is not liable for debt that was incurred during marriage unless the debt was assigned to that spouse in the dissolution judgment.

While Fam C §916(a)(2) specifies that it does not affect the liability of real property for the satisfaction of a lien on that property.  The fact that MSAs are enforceable
when signed means that property divisions in MSAs change the character of property from community to separate property once the MSA is signed…not when
the judgment of dissolution is entered (which is usually sometime later).

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