21 January 2021
Do we need to formalise our separation?
If you are coming out of a relationship, whether you were cohabiting, married or in a civil partnership, you may be asking if you need to formalise that separation. A separation agreement is a formal contract which can be agreed between you and your former partner to determine the division of your financial assets and responsibilities.
‘No matter how amicable your separation is, and whether you were married or not, it is wise to seek legal advice on your financial position as complications can arise in the future,’ says Sadie Glover, a senior associate in the family team with B P Collins. ‘A separation agreement can save you money and upset in the long run.’
You are not legally required to obtain a separation agreement, but it will provide you with reassurance and certainty on where you stand. This will enable you to move forward and make key decisions about your own future, such your housing requirements and income. While a separation agreement is not strictly speaking a legally binding document, if it is drafted properly and with both parties having exchanged full financial disclosure it can be fairly watertight and very difficult to overturn.
Separation after marriage or a civil partnership
If you plan on getting a divorce or dissolution of your civil partnership, a separation agreement can be used to formalise the date when you started living apart and to agree the division of finances. This can save the expense of dealing with your matrimonial finances through a contested court process in the future.
If you are not yet ready to proceed with a divorce or dissolution, then a separation agreement can benefit you in the interim, by immediately helping you move on independently. It is generally a much quicker process than awaiting finalisation of the divorce and financial proceedings through the court, which can take several months.
Often couples will enter a separation agreement and then proceed with a non-contentious divorce or dissolution in the future, such as after two years separation. This way neither party has to be blamed for the breakdown of the marriage which can save a lot of acrimony. No-fault divorce is yet to be introduced in England and Wales; this is expected to come into effect from Autumn 2021. A separation agreement can be a good way of establishing common ground in respect of finances and other important matters arising from your separation, in the meantime.
The advantages of a separation agreement
A separation agreement has many advantages. Firstly, it can deal with finances and property that is held now as well as assets acquired in the future and is advantageous even if you have little or no capital at the time of separation.
There have been a number of cases in the past few years where, even decades after separation, a financial claim was made by a former spouse or civil partner. For example, in the case of Wyatt v Vince the wife applied for financial relief some 18 years after divorce. During the time of separation Mr Vince had founded a successful green energy business and Ms Wyatt was successful in obtaining a small lump sum award despite the lapse in time. If a separation agreement had been entered into at the time of separation, Ms Wyatt would likely have received much less, and Mr Vince would have saved a significant amount in legal costs.
Your agreement can also be used during your divorce or dissolution court proceedings to seek a consent order for a more creative arrangement in dividing your assets. For example, you may be very keen to protect a pension and may be prepared to offset your spouse or partner’s interest in this pension by offering them a larger interest in the matrimonial home.
When you enter the court arena, this type of bargaining and offsetting is taken out of your hands while a separation agreement would allow for this flexibility. In fact, a separation agreement can be so wide as to also include terms regarding the responsibility each of you will take in relation to the upkeep and care of your children.
Finally, after separation, spouses and civil partners may be entitled to maintenance. This maintenance is paid normally each month by the higher earning spouse to the lower earning spouse and helps you to adjust to your new life after separation. A separation agreement can also outline what if any maintenance will be paid.
Separation and cohabiting couples
If you have been cohabiting with your partner without getting married or entering a civil partnership, then there is no set piece of legislation that deals with separation and you may be surprised to know you have no automatic rights.
A separation agreement will provide you with certainty and enable you to move forward in life confidently.
Cohabiting partners may have joint assets and liabilities and should seek to reach agreement over the division of their assets. We can assist you in advising what documents need to be shared with your former partner, and what is a fair division of the assets. If an agreement can be reached, we will draft the terms of the agreement to ensure that your interests are protected. Prior to entering any separation agreement, it will be necessary for you to exchange full disclosure of your assets and liabilities to your partner. They will be expected to do likewise.
If a settlement cannot be agreed amicably, then it may be necessary for you to make an application to the court.
For example, this could be to ask the court how the family home should be divided, which may be problematic if the house in which you cohabited was only in one of your names legally. It is important that you obtain early legal advice in this scenario in order that the best case can be formulated for you, and your interests protected.
Who does not need a separation agreement?
Not everyone will benefit from a separation agreement. If you have been cohabiting, and you had no children together or no shared financial assets such as a house, then you may not require any formal separation agreement. However, if you are unsure, it is always wise to seek some preliminary advice.
Putting children’s interests first
The day-to-day caring arrangements for children can be included within the terms of your separation agreement. We can ensure all issues are covered, such as holiday contact, paying for school trips, even what happens on Mother’s or Father’s Day.
The parent that does not live with the children will normally be obliged to pay child maintenance. The level of maintenance will depend on their income and how many children there are, as well as how often they keep the children overnight. We can advise you on the appropriate level of child maintenance and negotiate terms for inclusion in your separation agreement.
If an agreement cannot be reached between you both then an application should be made to Child Maintenance Services. However, you should be aware that if Child Maintenance Services have to collect payments, it will cost more. If you are the paying parent, your payment will increase by 20%. If you are the receiving parent you will receive 4% less. We would therefore recommend that you try and reach an agreement directly with the paying parent.