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Divorce settlement may have unexpected consequences

Texans may find a recent New Jersey Appellate court ruling involving a divorce settlement agreement instructive. The case concerned a father who divorced after the children reached the age of emancipation. His daughter had graduated from Rutgers University and had been accepted at Cornell Law School. During the time of the negotiations, the two were estranged. The father's divorce settlement obligated him to pay 50 percent of his daughter's post-graduate education costs of tuition, books, fees and room and board, which at Cornell totaled $74,580 per year.

The father offered to pay $7,500 per year for his daughter to attend Rutgers, contending that his financial situation had deteriorated, that a less expensive school should have been chosen and that his relationship with his daughter was poor. He also argued that the mother had inherited money that had been intended for the daughter's educational expenses. The appellate court upheld the trial judge's decision that the divorce settlement agreement had no language in it establishing any conditions that the father was claiming should impact his obligation. The judge directed the father to pay $112,500 as his portion of the educational costs.

The courts generally consider a divorce settlement agreement as a contract approved by the divorce court and will not rewrite it or add conditions, unless circumstances are proven to be significantly changed or there is some issue with the elements of the contract itself.

Divorce settlements can be complex and have a significant impact on future finances, especially in cases of high-asset divorce. Settlement language that is too broad or general may result in unintended consequences. An attorney with experience in asset division and valuation and knowledge of tax law and settlement strategies may be a significant help to parents who want to avoid a settlement with unnecessary obligations.

Source: The Huffington Post, "Divorce Settlements and Higher Education", Brad Reid, March 13, 2014

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Bruce Turner

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