What is a Property Settlement Agreement?
A Property Settlement Agreement (or PSA) is a contractual document that sets out the terms of a divorce, and in particular the property settlement. While it is not required in Washington state that the terms of the divorce be set out in a PSA, there are distinct advantages.
As a contract between the parties, state law allows us to reference the contract in the divorce decree without actually filing the PSA itself with the court. This means that we can keep much of the specifics about what you own, what you owe, and how you have divided your assets out of the public record. (Did you know that just about anyone can go down to the courthouse and look up your divorce file?) In recent years privacy has become an increasing issue with many people, and use of a PSA enables them to preserve much more privacy around their divorce than if the full terms of the divorce were spelled out in the divorce decree in the court file.
A second benefit is that as a contract, it is a binding agreement between the parties even prior to the court signing the divorce decree. Therefore the parties can begin to act on their agreements even prior to the finalization of their divorce (there is a mandatory 90 day waiting period between when a divorce is commenced and when it can be finalized in court.) They can begin changing names on titles, selling real estate, and transferring accounts without worrying that doing so will adversely impact them in the divorce proceedings.
A third benefit is that it can allow parties to start work on financing prior to the finalization of the divorce. Typically lenders are very reluctant to finance a home purchase or complete a refinance while a divorce is ongoing, because they do not know what the financial position of the person is going to be coming out of the divorce. It is not certain what assets they will still own or how support obligations might impact their income. Many lenders will agree to complete financing, however, if there is a completed and signed PSA which clarifies the financial settlement.