Taking Action

Get Answers Start Your Divorce Stop Your Divorce Divorce Forms Online Support

Divorce Tools

Online Divorce Online Negotiation Custody Tracker Custody Evaluation QDRO Preparation Divorce Calendar SEE ALL

Info Categories

Contemplating Divorce Children & Divorce Divorce, Dollars & Debt Divorce Laws Divorce Process Divorce Negotiation SEE ALL

State Resources

California Florida Illinois New York Texas SEE ALL

More Information

Articles Checklists Research Center Cases of Interest Dictionary Encyclopedia Encyclopedia (pop-up) Blogs

For Professionals

Generate Clients Free Network Page Submit Articles Sign In

The Divorce Encyclopedia
Property Settlement Note


Term Definition Property Settlement Note - a deferred payment in property settlement.
Application in Divorce Very often when divorcing couples negotiate the terms and conditions of a property settlement, they agree to a structured settlement, which is a series of smaller payments paid over time, as opposed to a lump-sum payment. In this routine, a series of payments over a period of time comes to more than the agreed upon settlement sum because the recipient normally receives interest to compensate for the delayed payment.

This difference reflects the time value of money, which is the concept that a dollar today is worth more than a dollar tomorrow because today’s dollar earns interest until tomorrow’s dollar is received.

Structured settlements are used in the distribution of marital property when one party has a valuable nonliquid asset, such as a house or a business that he or she wishes to keep, but little or nothing in the way in the way of other marital property to make an offsetting award. Suppose Rufus wants to keep the home he and Rhonda shared, but the agreed upon settlement sum is more than he can handle financially. Rufus can do this, however, with a property settlement note. In this arrangement, Rufus pays Rhonda a sum for a negotiated length of time at current interest rates. The money is a division of property, so it is not taxable. The recipient does pay taxes on the interest, not the principal. The note is normally collateralized. In this arrangement, Rufus gets the house; Rhonda gets an income stream.

The same basic regime applies Rufus’s buying out Rhonda’s interest in their home as would be if the he bought out her share of his business so he could keep it.

The calculation of interest may become problematic. When interest is not imposed, as can be the case, the installment payments must be discounted to their present value. Otherwise, the distribution may be based on an erroneously high award value.

Jurisdictions view interest in different ways. Some consider it mandatory; other generally award it; some say that a failure to award it must be explained; still others contend that awarding interest, either denying it or postponing it, is a factor to consider.

Unlike lump-sum settlement, which make for a clean financial break, structured settlements are a continuing financial tie between former spouses. Sometimes couples, for financial reasons, negotiate a deferred luimp-sum payment, which also includes the payment of interest.

Both lump-sum settlements and structured settlement demonstrate the variety of ways a marital estate can be divided so that former spouses both get something of what each wants because the terms and conditions of marital settlements are all open to negotiation.

See also Lump-Sum Settlement.

Add the Divorce Encyclopedia to Your Website!


The Research Center

Give Our Research Center a Try. Gain access to the same research material that lawyers often use to establish and win divorce cases. This material consists of legal journal articles and case explanation/analysis documents on a wide range of topics. If you think your situation is unique, your answers will most likely be here. In order to gain access to this area, you must establish an account, but you can search the documents before deciding.


The Divorce Source Difference

Since February 1st, 1997 (when we initially launched Divorcesource.com) we have helped millions of people contemplating or experiencing divorce. The reason we have been able to reach so many people is because we have made it a priority to listen to our customers. We have built a trust by listening and delivering what the customer needs, rather than what we think they want. This is the Divorce Source difference.


Social

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:

Custody Scheduling and Tracking

Easily Connect With a Lawyer or Mediator
Have Divorce Professionals from Your Area Contact You!
Enter Your Zip Code:

 

Start Your Divorce File for Divorce

 

Settle Your Divorce Negotiate Your Divorce

 

Track Child Custody Track Custody & Visitation

QDRO Preparation

Limited Offer Women's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"The Absolute Best Investment in Your Divorce"

Men's Rights Manual For Divorce
Cover Price: $55.95
Your Price: $29.95
You Save: $26.00

"Uncover Your Options and Unleash Solutions"