Is a Separation Agreement necessary?

Relationships (Family)

When a couple separate “amicably” they are often reluctant to involve lawyers. They may have already worked out what the division of their assets will be and they wonder why they need to commit anything to paper. There is often the wish to avoid costs at a time of stress and this is understandable. However this may be short sighted in terms of the risks.

When considering whether a written agreement should be entered into it is necessary to look at the Property (Relationships) Act 1976. This is the act which governs the rights and obligations of a couple on the break down of a qualifying relationship.

Firstly applications to Court can be made up to a year after a dissolution of a marriage or civil union. As a legal dissolution cannot be applied for until two years after a separation that means at least three years. If the relationship is a de facto relationship then the application can be made up to three years after separation. However that is not the end of the matter because a Court can extend that time frame if they consider there has been good reason for the delay.

Secondly the starting point is an equal division of relationship property. The couple may feel comfortable that they have divided all relationship property equally so the risk of issues arising later is small. However they may have in fact excluded items that are relationship property or included items that are separate property without realising it. Without discussion with a lawyer they may have inadvertently left open the potential for a claim.

Thirdly while the starting point is equal division there are some circumstances where there are compensatory payments available. These may not have been thought about at all.

There is also the added complication that if no separation agreement is signed and no dissolution applied for before one party dies, the survivor could claim against their estate even though there has been an informal division. This would cause unnecessary stress for the grieving family.

The couple may feel that given they have completed an amicable division of assets equally between them the risk is so small that it is worth taking. This becomes a judgement call for them at that stage. Without being sure the correct advice has been taken on both sides there remains a risk for at least three years from separation of a claim being made. Often this can happen when a new partner arrives on the scene, or extended family or friends become involved and suggest a better deal could have been obtained. Regardless of the merits of that view, it involves unnecessary stress and cost when it occurs.

For any agreement to be binding there are formalities that have to be complied with. These are set out in the Act. Briefly,

  • The agreement must be in writing;

  • There must be advice from lawyers from independent firms;

  • There must be disclosure of assets; and

  • There must be an understanding of the agreement and what it means.

  • There must also be an absence of duress in entering into the agreement.

There are some situations where you cannot escape completing a separation agreement and using independent lawyers. For instance if there are financial arrangements which require bank funding such as one party buying the other out of the family home. In that situation the bank will not advance funds for that purpose unless a properly executed separation agreement has been signed. Obviously the bank is concerned that their security is safe from future claims.

It is not enough for the parties to write their own agreement. Nor is it possible to use the same lawyer, or even law firm. The law is very clear that if there is to be full and final settlement of relationship property matters there needs to be an agreement in writing through independent lawyers that complies with the formalities of the Property (Relationships) Act. You are free to agree to something which departs from what the Act would say. So long as the formalities of the Act are complied with the chance of a later court intervening, without something more arising, are negligible.

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