As a divorce attorney, one lesson gets reinforced time and again: the importance of careful, precise drafting when it comes to divorce agreements and settlements. A recent Massachusetts Appeals Court ruling shows just how costly ambiguous language can prove to be years or even decades down the road.
The Case of the $400,000 Capital Gain
The case involved a divorcing couple with a postnuptial agreement that required splitting "gross income, including capital gains" as alimony after their divorce. Seems straightforward enough, right?
Not so fast. After the 2016 divorce, the husband sold the former marital home in 2021 for $3.675 million - netting him an $800,000+ capital gain after buying out his ex-wife's share.
She argued the gain qualified as "gross income" she was owed half of under their agreement. He claimed the appreciation on the already-divided asset didn't count as "income" for alimony purposes.
The Make-or-Break Details
Ultimately, the Appeals Court sided with the wife based on the agreement's failure to explicitly exclude capital gains on transferred marital assets from the "income" definition. As a result, the husband was hit with over $400,000 in additional alimony from the home sale profit.
While the agreement attempted to address income and asset division, its ambiguous wording around seemingly basic terms like "capital gains" left a major financial question unresolved. And years of litigation later, that ambiguity carried a hefty six-figure price tag.
The Cautionary Tale for Divorcing Couples
For any family law attorney, cases like this drive home the crucial importance of airtight, carefully-drafted language in divorce agreements and settlements. A few ambiguous terms can lead to diametrically opposite interpretations - and protracted, expensive court battles to resolve those conflicts years or even decades later.
A bit of foresight and precision when initially defining terms like "income," "assets," "capital gains," etc. could have avoided this entire costly dispute. But once signed, separating spouses are often stuck with any vagaries or unintended gaps in their agreements' language.
As this ruling shows, divorce agreements with careless or ambiguous drafting can leave financial questions unresolved indefinitely until a judge weighs in. By then, the legal fees have piled up and one party faces a surprisingly large bill based on the agreement's linguistic imprecisions.
For any couple with significant assets or future income sources, do yourselves a favor: when it comes to your divorce agreement, leave no term undefined or open to conflicting interpretations. The few extra billable hours to tight drafting could end up saving you hundreds of thousands in the long run. An ambiguous sentence can prove shockingly expensive years later.
Disclaimer: The content provided in this blog is for informational and educational purposes only. It should not be construed as legal advice and readers should not act upon any information provided without seeking professional legal counsel. The author does not guarantee the completeness or accuracy of the information provided. This blog is not intended to create an attorney-client relationship between the author and the reader.
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