Do you have a retirement plan—an IRA, 401(k), or other employer-sponsored pension plan? If you do, you likely understand the value of seeking the advice of a professional in planning for you retirement. It should be no different when married couples separate and begin negotiating a property settlement. Having an attorney experienced in the valuation of retirement plans is essential to ensure that you don’t walk away from the marriage leaving money on the kitchen table. This point is aptly demonstrated in a case recently decided by the North Carolina Court of Appeals.
In Herring v. Herring, a husband and wife separated after 13 years of marriage and negotiated a division of their assets—but, neither party retained an attorney to prepare their property settlement agreement. Working without any legal training, the parties valued the wife’s retirement plan based solely on her cash contributions to the account—failing to consider the additional value that may have been realized by utilizing the (complex) method of valuing retirement accounts established by the Court of Appeals.
Nearly five years after entering into the settlement agreement, the husband realized that the value of his estranged wife’s retirement account was “far greater” than the value the parties had divided. When the wife did not respond to the husband’s request to recalculate the value of her retirement account, the husband asked the trial court to set aside the parties’ settlement agreement, which the trial court refused to do.
The husband appealed the trial court’s decision to the Court of Appeals, which rejected the husband’s argument that a “mutual mistake” as to the value of the account justified rescinding the agreement. The Court noted that it did not appear from the wife’s testimony that she was under any misapprehension as to the value of her retirement account when entered into the agreement. But, if both parties were in fact mistaken, their mistake was to divide their property under an “erroneous understanding” of the laws that control the division of marital property. And, such a “mistake of law” is not sufficient as a basis to rescind the settlement agreement.
Furthermore, the Court held that the trial court was neither obligated nor permitted to conduct its own valuation of the retirement account for the parties. Parties may enter into settlement agreements to divide their property in any manner they choose. And, once the parties have entered into a valid agreement, the trial court cannot disregard the parties’ contract.
Consequently, the husband in Herring was afforded no relief from the settlement agreement he drafted without the advice of legal counsel. So, even if you believe that you can amicably divide your property with your spouse, retaining an attorney to help draft a settlement agreement is a prudent decision that can help you keep the peace and avoid costly and acrimonious litigation.