Understanding Separation Agreements

What Is a Separation Agreement?

A separation agreement is a written and signed document between two spouses that wish to separate. A separation agreement addresses a wide range of family law issues and records how a couple has agreed to settle them. 

Couples should consider a separation agreement for the following reasons: 

• The agreement is a binding legal contract between you and your spouse. 
• The agreement can be enforced by the court. 
• You have control of the final outcome. 
• It’s cheaper, quicker, and less stressful to resolve family law issues using a separation agreement than by going through the court system. 

What Does a Separation Agreement Deal With?

1. Support and Parenting Arrangements 

Separation agreements are designed to address a wide range of family law issues, including whether a spouse should receive financial aid, the amount and duration, and how the parties will manage the tax implications arising from such payments. This is known as spousal support. 

When children are involved, a separation agreement can set out how children will be financially supported - child support and special expenses, with whom they will live, where they will live, how parents will share time with them, and how decisions affecting the children will be determined. 

2. Property and Debt Division 

A separation agreement can cover property and debt issues, including how family property and family debts will be divided between the parties. 

The Family Law Act sets out what assets are considered family property, which debts are family debts and how these items are divided.  In essence, when a couple separates, each spouse has an equal entitlement to assets that were acquired during the relationship as well as any increase in value of excluded property. The Act expressly sets out the categories of excluded property which are not divisible except for the increases in value.  Some common exclusions are:  property that was brought into the relationship, and gifts and inheritance.  The Act also provides for circumstances that permit unequal division of family property, and division of excluded property. 

Family debt is defined as any debt incurred during the relationship. Each spouse is typically responsible for half of this debt, although unequal allocation of such debts may sometimes be warranted under special circumstances in accordance with the Act. Debt incurred after separation may also come into play if it was incurred to maintain family property. 

While the Act is the guiding regime in the negotiations on property and debt division, parties are free to deviate from strict adherence to the Act and reach a fair, and compromised resolution that works best in their circumstances.  That is the beauty of entering into a Separation Agreement as it gives the parties control over the outcome.

3. Family Home Ownership and Usage

When spouses separate, one of the first issues discussed is what to do with the family home.  It can be sold, bought out, retained by one party or some other arrangement. 

Typically, most spouses decide to sell the family home and divide the sale proceeds, or allow one spouse to buy out the other based on an appraised value.  Sometimes spouses may opt to hold off on the sale of the family home in order to allow the children to stay in the property for a prescribed period.  This may entail one of the spouses living in the family home with the children or nesting - children remain in the home while parents take turns staying at the home. The spouse residing with the children may have to pay a larger share of the expenses related to the upkeep and maintenance of the family home as he/she gets exclusive use of the property. 

Legal Advice on Separation Agreement

Separation agreements are meant to be permanent. That said, our provincial laws allow the courts to vary or set aside agreements under certain circumstances.  For instance, if a court finds that a spouse did not understand the consequences or nature of the agreement with respect to property division, such terms can be varied or set aside.  Getting legal advice and having a lawyer draft the Separation Agreement is key to significantly reducing the risk of a successful challenge to the agreement in the future. 

Due to conflict of interests, spouses cannot share the same lawyer.  For efficiency and cost-savings purposes,  one spouse’s lawyer can prepare the agreement, while the other spouse can seek independent legal advice regarding its contents prior to signing.  The parties may also negotiate the sharing of the legal fees involved with drafting the initial agreement.   

If you wish to learn more about negotiating a separation agreement with your spouse, contact us at England Lam Family Law, to Book your initial consultation.