What does hold harmless mean in a divorce?

Answer 1

A "hold harmless" clause, or an indemnification clause, whether in a document related to a divorce or otherwise, is a common contractual provision which generally says that A will hold B harmless from something that would otherwise cost B money. Very often a "hold harmless" clause is used when there is a potential claimant who has a legal right to make his claim against B, even though A bears some or all of the legal or moral responsibility. In a divorce action, for example, a "hold harmless" provision might be used when the husband agrees to hold the wife harmless from liability to the IRS. The law provides that when a husband and wife file a joint return both are generally legally responsible for any any underpayment, including interest and penalties, and the IRS can decide to collect the amount due from either one. If, however, only the husband had income, and only he was aware of what should have been reported and what taxes should have been paid, his lawyer may advise him that it would be fair for him to agree in a divorce settlement to hold his wife harmless from any IRS action. If the settlement contains such a clause, then even if the IRS were to bring proceedings only against the wife, and even if the IRS collected from the wife (by payment, garnishing wages or executing against other property she owns), the husband would be required to pay to the wife everything she had to pay. The details of the hold harmless agreement will often provide whether interest, legal fees, or even the value of the wife's time is included. It should also provide a means for the husband to receive notice if the IRS contacts the wife, and make it clear which of the two parties has the right or the obligation to negotiate with the IRS or to make decisions about the handling of the case. Often a "hold harmless" clause will be subjected to limitations. For example, the parties may agree, that any harm less than some minimum amount is not going to be reimbursed, or that no more than some maximum amount can be collected. The parties may also agree that the reimbursing party post a bond, or pay a certain amount into escrow, or to a trustee so that funds will be readily available. The parties may set time limits for the "hold harmless" claim to be made, and they may decide to agree that if a dispute regarding the "hold harmless" clause arises between them that they will settle the matter through arbitration instead of going to court. In complex situations, such as when a company sells a part of its business, the "hold harmless" provisions can take many pages to set out, since the parties are trying to make an agreement about how to deal with every situation that may possibly arise. Although there are many available examples of language that has been used by others, there is no single form that is in general use, and no formula that is required by law. The parties must each imagine what harm could come to them which, in fairness, should be the responsibility, in whole or in part, of the other, and that analysis forms the basis for negotiating a "hold harmless" clause.