Separation Agreements – The Basics
The breakdown of a relationship inevitably triggers a number of issues, both personal and financial, that may require immediate and careful management. A common way forward is for the parties to negotiate and sign a Separation Agreement. A Separation Agreement is simply a written contract that intends to settle all issues between spouses when a relationship ends. What terms spouses include in their Separation Agreement is really only limited by their imagination so long as what is being sought and agreed to is reasonable. Nevertheless a well-drafted Separation Agreement ought to comprehensively address the following matters:
Division of Property and Debt
As a rule, the law presumes that each spouse is entitled to keep what they brought into the relationship and will share in all property acquired (or, share in the increased value of property) during the time the parties are together. Spouses are generally free to negotiate and divide the property in whatever manner they see fit so long as it is reasonably fair. Consideration ought to be given to how the spouses will manage family assets, debts and liabilities, including banking and investment accounts, division of pensions and employment benefits, and, if applicable, a spouse’s business interests.
Spousal support is the payment of money by one spouse to the other to cover reasonable daily living expenses. It is intended to help a spouse maintain an approximate standard of living he or she may have previously enjoyed, or to compensate a spouse for financial decisions and sacrifices made during the relationship. Spousal support is not a right and determining entitlement to support is dependent upon a number of factors including the length of the marriage, income disparity and other socio-economic factors. Spouses may agree to a lump sum or monthly installments that may or may not accord with the Spousal Support Advisory Guidelines. A Separation Agreement may also permit the right of termination by the payor if a receiving spouse enters a new long-term relationship with another person.
When children are involved there are two fundamental issues to consider: firstly, the payment of child support, and secondly, how the parties will continue to raise their children after separation.
(a) Child Support
Child support is a monthly sum paid to a parent who normally has the child for the greater amount of time. Child support is a right of the child (it does not belong to the receiving parent) and is designed to help cover the child’s daily living expenses. Every parent is obligated to financially support their children. This is generally a fixed amount under the Federal Child Support Guidelines, which sets out the amount each parent is required to pay based on their income and number of children.
(b) Parenting Time, Parental Responsibilities and Guardianship
An agreement will also need to set out in some manner how the parties will continue to care for the children post separation, often in the form of a parenting schedule. Other important considerations may include where the children will be schooled and what extracurricular activities they will participate in. The legal status of the couple will also have implications, as married parties may deal with children under the federal Divorce Act, which uses terms like custody and access to describe parenting arrangements, or the Family Law Act which refers to parenting time, parental responsibilities and contact for those individuals who are guardians.
Depending on the spouses’ civility towards one another and their ability to work together, an agreement may need to be remarkably detailed, or it may be intentionally drafted in broad terms to allow greater flexibility as children mature or the circumstances of the spouses change. It is ultimately up to the parties to negotiate and craft terms that best fit their situation.
A good Separation Agreement may also impose other obligations including:
- Each party will agree to maintain a life insurance policy naming the other parent as sole beneficiary of the policy in trust for the children.
- The parties will periodically exchange and review full financial information and that material changes in one spouse’s financial circumstance may trigger a review and recalculation of spousal and child support.
- Any undisclosed assets owned by one spouse at the time of signing the Separation Agreement will be deemed to be equally owned by the other, or the receiving spouse is entitled to payment of one half of that asset’s value.
A properly executed Separation Agreement that is filed in court in British Columbia will be treated as if it were an Order of the Court. The obvious benefit to filing a Separation Agreement in court is that it allows either party to enforce it rights under that agreement against the other if it becomes necessary to do so.
Getting Independent Legal Advice
This is a critical aspect for the following reasons:
- To ensure that the language of the agreement achieves what the parties intended for it to do;
- A full explanation of how the agreement may impact your rights and obligations not simply today but for the future;
- It can prevent parties from later claiming that they did not understand the contents or the terms of the agreement.
A unique quality of Separation Agreements, unlike many commercial contracts, is that if a court deems a term to be unenforceable, the offending term may simply be struck and the remainder of the agreement will continue to bind the spouses. The policy for this is simple. A Separation Agreement is designed to ensure that spouses can freely negotiate a final and legally binding commitment to settle their affairs. The courts are alive to this and will go to great lengths to uphold the party’s original bargain. For these reasons, obtaining independent legal advice before signing is vital as the vast majority Separation Agreements are designed to be permanent and remain in force until one or both of the spouses die.
The reality is that a Separation Agreement is one of the most cost-effective and superior ways of settling family disputes. A properly executed Separation Agreement is an indispensable tool that can mitigate the risk of future litigation while at the same time, managing the party’s present affairs as each spouse transitions into the next phase of their lives.