Service level agreements are very common in the contract world in business, particularly when someone is providing a service or product to a client. These agreements set the expectation for something specific being done by someone by a certain time and if the timeline isn’t met then remedies are outlined for the time period until the task is done.
A marital settlement agreement is essentially a business contract setting timelines and expectations of how different assets and debts will be settled and ongoing payments or expense reimbursements will happen between two parties. Most attorneys are good at documenting the “what” is supposed to happen (e.g. Bank account X will be split between parties, Party X will keep the marital home). The “who” needs to make that happen, the “when” it needs to be done by, the “how” of making it happen, and the “what happens if the who-doesn’t-do-the-what-by-the-when-that-was-agreed-upon by the parties” are often left out, thus limiting enforcement of the agreement and causing a lot of upset post-divorce.
Support Example:
- Who: Husband will pay wife child support.
- What: $2k per month. Duration? Terms for child support ceasing?
- Where: Wasn’t indicated. By mail? Virtually? Dropping payment off?
- When: Not indicated. Could be the 1st of the month or the last day of the month.
- How: Not indicated. Cash? Check? Wire transfer? Digital payment?
The person that enjoys having control over someone would love this ambiguity. You can’t even assign a remedy to the payee for non-payment because it is so vague. Imagine this, the payor could decide to pay $67/day in one-dollar bills every day for 30 days and be in compliance with this agreement. $67/day * 30 payments of $67 = $2010. That extra $10 paid the payor could then deduct the following month.
The next month the payor could decide to pay $1990 on the last day of that month. “What’s the problem? Over time it works out,” they will say because they did pay $4k for 2 months, so that is $2k/month. Now put yourself in the payee’s shoes in this example. Imagine budgeting, dealing with the ambiguity of when the money is going to come in, and the continued stress that this person still has financial control. It is incredibly stressful and causes many people to walk away from what would be rightfully theirs because it is simply too hard to enforce and the fight is out of them after the divorce agreement was signed.
The following would be better guideline language that sets expectations for both parties:
- Who: Husband will pay wife child support for Child X until Child X graduates from high school and reaches the age of 18 or becomes emancipated in the eyes of a court.
- What: Amount to be paid shall be $2k per month due on the 1st day of the month.
- Where/How: Husband shall send payment via Zelle to Wife’s Bank of Divorce Account X5678
- When: Payment shall be received by 5pm on the 1st day of the month. If the 1st day of the month is on a bank holiday payment shall be made by the closest business day to the 1st, which may be before or after the 1st depending.
- Remedy: If the payor misses the payment timing requirement there will be a penalty of either $X per day or interest accrued on outstanding amounts at X% until the amount is paid in full plus penalties. Put in an example of how this calculation works so there is no ambiguity if it needs to be enforced.
Having this increased level of detail and clear expectations should feel better for the recipient, and both parties will fare better having set rules to follow with a document to refer to for knowing those expectations. Some other critical areas to assess for appropriate service level agreements would be:
- Spousal support
- Marital residence transfers or sales
- Retirement account settlement(s)
- Bank account settlement(s)
- Credit card account settlement(s)
- Equalization payment settlement
- Anything really that has a dollar sign involved
- Notification of anything impacting you, your ex, or your children: Introducing children to a new significant other, cohabitation, marriage, change of job, etc.
- Requests that require approval: travel, extra-curricular activities, expense reimbursements, first right of refusal, etc.
These suggestions are meant to stir a conversation with your CDFA, CPA, and/or attorney on what is enforceable in your jurisdiction and is best for your specific case. Many states have case law and remedies already crafted in boilerplate language that goes into a typical settlement agreement or court paperwork, but many do not so ask the question and know the who, what, where, why, how and protection in case of default for your case.
