Separation Agreements or Divorce? What shall you choose upon the breakdown of your relationship?

What is a separation agreement?

“A separation agreement is a legal agreement made between individuals who are contemplating imminent separation or have already separated. Most couples entering into a separation agreement are generally married or in a civil partnership who does not want to proceed for divorce yet”

Introduction

Under Family law, married couples and civil partners have a choice of either to apply for a divorce or agree on a Separation agreement. In last week’s blog, we explored grounds for divorces. This week we will explore the pros and cons and mechanics of Separation agreements.

Purpose of the separation agreement

 A separation agreement does not end a marriage. If a couple wishes to divorce, one of the parties will need to start divorce proceedings. The separation agreement usually sets out the agreed financial arrangements during the period of separation usually on the basis of how the couple’s finances should be divided in the event of a subsequent divorce or dissolution.

Separation Agreement or Divorce?

A separation agreement is usually only appropriate where parties have already separated, or are going to separate in the near future, but do not want to start divorce proceedings and in many cases want to give each other some time to think about their marriage or civil partnership.

Practically, we have seen that many couples and civil partners rekindle their love affair or started living together again after some time and did not proceed for divorce after entering into a separation agreement. Here are the pros and cons of a Separation agreement.

Pros of the separation agreement

Supports personal beliefs

Some parties may not want to divorce for religious, personal or cultural reasons. A separation agreement may be an appropriate compromise where the parties believe the marriage is at an end, but do not wish to obtain a divorce.

Potential for reconciliation

As the marriage still exists, the couple can decide to reconcile at a later stage if the separation does not work out.

Halfway house

Some couples may feel that the marriage is close to ending, but are not emotionally ready to divorce. A separation agreement is a helpful first step towards divorce from which the parties are able to row back if they wish.

Ability to retain benefits that are lost on divorce

Some benefits, such as cover under medical insurance policies, life insurance policies and pensions, are not available once couples divorce. These benefits are often still available where the parties are separated as they remain married. Staying married also means a couple can take advantage of certain income tax benefits.

Supports co-operation

Agreeing on the terms of a separation agreement displays the parties’ willingness to co-operate and mutually agree on how they will get on with their lives and bring up their children.

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Flexibility

A separation agreement can contain provisions or deal with issues that are beyond the scope of the court’s jurisdiction, which makes them very flexible. For example, an agreement may contain provisions about payment of certain outgoings on a property or set out how much time a family pet will spend with each party.

Protection of assets

An individual may want to protect certain assets, including the following:

  • Inherited wealth.
  • An interest in a family business.
  • Gifts received from a third party.
  • Family heirlooms.
  • Property owned before the marriage.

Clarifying what will happen to these assets on separation and in any later divorce proceedings evidences the parties’ intentions regarding the division of their assets. This can help if the court later becomes involved in contested financial remedy proceedings and is likely to influence the court’s award.

Certainty

The parties can agree on how their finances will be arranged during the period of separation and how their finances will be divided if they later divorce. This can save the uncertainty, time and stress of later contested financial remedy proceedings.

Transparency

A properly negotiated separation agreement should contain financial disclosure, so both parties know the value (or approximate value) of each other’s assets on separation. 

Debt protection

A separation agreement can set out which party should meet existing and future debts and can, therefore, be used to protect the other party’s assets from being used to satisfy those debts. 

Protection of family members

A separation agreement can protect the financial interests of family members (such as children from a previous marriage) by ensuring certain assets are ring-fenced for them in the agreement. 

Protection of business partners

If one party has an interest in a family business or a small private business, a separation agreement can protect that interest and prevent disruption to the business on the parties’ separation and any later divorce.

Separation Agreements are cautious and pragmatic way forward

Minimises acrimony on divorce

Clearly setting out in a separation agreement how assets are to be divided in any later financial remedy proceedings should lead to fewer arguments about finances on divorce and a more amicable relationship between the parties in the future.

Provision on death

The inheritance prospects of family members such as children and grandchildren can be protected in a separation agreement.

Parties can agree on own terms

The parties may have a creative plan for dividing their assets on separation and in any later divorce proceedings. For example, one party may not want to make a claim against the other party’s pension. A separation agreement provides the parties with the freedom to agree on their own terms without a solution being imposed on them by the court.

Immigration status

If a party has been permitted to enter or remain in the UK as the spouse of a person present and settled in the UK, and the marriage ends in divorce, he or she may need to leave the UK, or make an application to remain in the UK in a different category. A separation agreement could avoid the need for uncertainty about immigration status, as the parties remain married, helping to maintain the family’s status quo.

Saves money

It should be cheaper to negotiate and draft a separation agreement than to embark on contested financial remedy proceedings at a later date.

Speed

It is quicker for parties to enter into a separation agreement that can be made into a consent order than to embark on contested financial remedy proceedings in the future.

Cons of the separation agreement

Uncertainty

A separation agreement cannot exclude the court’s jurisdiction in financial remedy proceedings on divorce. Either party can apply to the court for financial orders and request the court to ignore some, or all, of the terms of the separation agreement.

Inability to achieve a clean break

As a separation agreement cannot exclude the court’s jurisdiction in later financial remedy proceedings, the parties cannot be assured of a financial clean break. This means that any later enhancement in a party’s assets, perhaps through an inheritance or windfall, will not necessarily be protected from a financial claim by the other spouse.

May penalise the economically weaker party

Another important Con of the separation agreement is that although the parties can agree whatever terms they like on separation. This may lead to the economically weaker party feeling pressured into accepting less beneficial terms than they may have obtained in later financial remedy proceedings, particularly where, for example, that party feels guilt about the separation. If one party puts undue pressure on the other party the separation agreement will not comply with the principles. This would leave the separation agreement at risk of not being upheld in any later financial remedy proceedings.

Changes in circumstances

If the parties later decide to divorce and begin financial remedy proceedings, significant changes in circumstances may have occurred in the time between the separation agreement being concluded and the financial remedy proceedings starting. For example, one party may have become incapacitated or bankrupt. The more time that passes, the more likely life changes mean that a court is less likely to uphold its terms if one party would be left without their needs being met.

Review clause

If a separation agreement is entered into on a long term or indefinite basis and divorce in the near future is not contemplated, then a review clause may be included in it requiring a review of its terms on a significant change in circumstances. This means a separation agreement may not be finished once executed as many couples believe. A review means further time, legal fees and perhaps difficulties agreeing on any necessary changes. However, by agreement of both parties the review clause can be excluded.

Varying the agreement

Either party can try to vary the agreement at a later date. The court will have jurisdiction to vary the agreement if it comes within the definition of “maintenance agreement” under section 34(2) of the Matrimonial Causes Act 1973 (MCA 1973).

Financial provision for children problematic

A court considering financial claims in any later financial remedy proceedings will primarily be concerned with ensuring any child of the family is financially secure and ensuring that arrangements which may have been drawn up years before remain in the child’s best interests. Circumstances can easily change as a child grows older. 

Inability to remarry

If a party embarks on a new relationship, remaining legally married can be awkward and prevent the new couple from getting married legally. This may cause serious issues later on especially if one of spouse then wishes to divorce the other and marry new partner.

Inheritance issues

Some separation agreements but not all, provide no inheritance rights and prohibit claims under the Inheritance (Provision for Family and Dependants) Act 1975. If a party has agreed to waive their inheritance rights and their spouse dies while they are still married (and their spouse did not provide properly for them in a will) they may be in a precarious financial position depending on the terms of the separation agreement.

Legal fees

If one of the parties later tries to renegotiate the terms of the separation agreement or file a claim for financial remedy, the legal fees spent in drafting and negotiating the terms of the agreement may prove wasted.

What Would You Do Next?

You can rely on the experience of Legal Ally’s expert family and divorce lawyers. We can help you to negotiate and draft a separation agreement for a fixed fee. You can speak to our experienced lawyers instantly through our “Instant Access” service.

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