Separation - the key issues

Following a recent decision to separate from my wife, I have been unable to find a good, comprehensive, rounded source of information or guidance on the subject anywhere on the web, although this website contained lots of pointers and gems of information to point me in the right direction. Consequently, after many hours of internet research, I have prepared a summary of everything that I have learnt. I have posted it below in case it is of any help for others in my position.

Please note that I am not a lawyer and have obviously focused on my particular circumstances (e.g. spouses both earning, house paid for, teenage children etc.), so this is not going to be all things to all men (or women). I would welcome any comments or corrections with regards to anything that anyone knows to be incorrect or misleading.

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Separation
– my understanding of the key issues, based on internet research of UK websites.

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Definition: Whether considered a trial or not, for a separation to count as grounds for a divorce after two years, the couple must stop sharing their lives and living arrangements such as sexual relations, cooking, laundry and social engagements etc. i.e. they must live in ‘separate households’. Note that a couple can live in separate households within the same property. A voluntary separation is not to be confused with a ‘legal’ or ‘judicial’ separation, which is a rarely used legal process that grants all the normal effects of divorce without actually ending the marriage – typically used where religious sensibilities forbid divorce. This article is not about judicial separation.

Purpose: A trial separation is undertaken to test if a couple will be happier living apart – possibly still as friends – rather than sharing life as cohabitants. It allows each partner to experience personal freedom and independence without committing to a divorce, although most separations ultimately lead to a ‘no fault’ divorce by consent. Separation is normally preferred as a means to divorce if neither partner wishes to blame the other for the breakdown of a marriage, and/or if both partners want to try to maintain amicable relations.

Formalised by: a Separation Agreement or Deed of Separation, which is a written agreement between the couple as to how they will divide the matrimonial assets and how they will arrange and finance the upbringing of any children. A Separation Agreement cannot be enforced by a Court Order without filling specific legal actions; however, if the separation results in a divorce, it can then be used by the Court as the basis for a financial Consent Order, but normally only if: (1) both parties receive independent legal advice prior to signing the agreement; (2) there is a full and frank disclosure and exchange of financial information; (3) both parties remain in agreement throughout the separation; and (4) there is no significant change in circumstances, such as a serious illness. In short, the Court has the power to overrule a Separation Agreement upon divorce if it considers the agreement to be unfair.

Matrimonial assets are: (1) the house or houses owned by either or both parties; (2) all savings and investments including PEPS, ISAs, deposit accounts, Premium Bonds and stocks and shares; (3) the value of a family business; (4) the pension funds of both parties; and (5) any particularly valuable goods such as antiques, jewellery or classic cars. Matrimonial property is all the property acquired by either partner from the date of marriage until the date of separation except for gifts, day-to-day inexpensive personal possessions and items owned prior to the marriage that are not especially valuable. Marriage presents are normally considered to be the property of the partner to whom the giver was a personal friend or relative. If a house was specifically bought to serve as the family home, it is considered to be matrimonial property regardless of whether it is in sole or joint names, and whether it was bought before or after the marriage. The Cash Equivalent Transfer Value (CETV) is the prescribed method for the calculation of pension rights on divorce, but whilst this is accurate for personal/stakeholder pensions, it is not so for many occupational schemes which require a pension audit by an actuary to include for the value of death in service benefits, the spouse’s lost pension rights, AVCs, discretionary benefits and future expectations of the scheme member.

Division of matrimonial assets: In recent years (following White v. White), the Courts have been directed to aim for equality and fairness of asset distribution between divorcing couples, with the ideal of a 50/50 split being departed from only if there is very good reason to do so. Accordingly, when a Court is asked to decide how matrimonial assets should be fairly divided, the preparation of a financial settlement usually involves a long and expensive auditing procedure which is best avoided if at all possible. The financial settlement is not part of the divorce itself, so if the couple are cooperating amicably it can be worked out fairly between them without going to Court, bringing huge savings in time and legal fees on both sides.

Effect of separation on teenage children: A 1985 study of 111 separated families in Edinburgh by Dr Ann Mitchell found that the worst result of separation on teenage children was that they felt they did not see one parent often enough. Five years after divorce, only one in ten children from the study enjoyed a warm relationship with an absent parent. Another effect found was that parents were often very curious about their ex-partners, gently questioning their children for information after visits, which was very hard on the children. It was difficult for adults to draw the line between interest in what the children had been doing and curiosity about the ex-partner’s new life. One child said that the constant questioning had "torn her apart". Separating parents should work hard together to avoid these sorts of scenarios and effects.

Options for financial separation, #1 - informal: A couple with good jobs living in a jointly-owned house with no outstanding mortgage could remortgage the house in joint names in order to purchase a second (more modest/cheaper) house for one of the partners to live in. This would be very straightforward, especially if a previous mortgage account for the same property has been left open, as there would be no costs beyond the monthly mortgage repayments. However, in the case of a subsequent divorce, the equity in both properties would go into the ‘matrimonial pot’ for subsequent division between the partners. This may mean selling one or both houses in order to redistribute the value of the assets, but even if each partner is able to stay in their respective house, the ownership of both houses will need to be changed and two single-named mortgages will need to be taken out in order to clear the joint-named remortgage. Note that there may be Capital Gains Tax to pay on any increase in value of one of the homes.

Two other major issues with this option are: (1) that of the potential for mistrust between the partners about each being financially prudent with the joint finances; and (2) that of both partners maintaining their regular contribution to the remortgage payments, especially as one person will probably be living in a better house than the other, and either could miscalculate or mismanage their part of the couple’s joint financial affairs. Combine these issues with the possible emotional strains following the initial separation, and it is clear that mistrust and resentment could easily lead to financial disagreements and contentious arguments which could prove expensive in legal fees to both parties at the time of a subsequent divorce.

Options for financial separation, #2 - formal: A couple with good jobs living in a jointly-owned house with no outstanding mortgage could enter into a formal Separation Agreement with full disclosure of their assets and liabilities. This would allow each partner to start their separation with financial independence, full control of their spending, and free of the risk of financial mistrust interfering with efforts to maintain an amicable relationship. Ownership of the matrimonial home could be transferred to the partner staying in it, at the same time as they then take out a single-name mortgage in order to buy-out or balance the couple’s financial settlement. The other partner could then use this payment as a down-payment for a home in their name only, backed-up by a mortgage in their name only. Each would then be solely responsible for their own financial affairs. Provided the agreement is found by the Court to be fair at the time of a subsequent divorce, the Separation Agreement should then be upheld by Order of the Court.

This option requires the time-consuming and sometimes complex calculation of the matrimonial assets and liabilities, and calls for an amicable negotiation of a financial split that is acceptable to both parties. (The starting point for any Court-ordered settlement is always 50/50.) In order for a Separation Agreement to be taken seriously by a Judge when drafting a divorce Consent Order, the signatories must have each taken independent legal advice. This can be sought in one of two ways:

1. The traditional adversarial approach: Lawyers are, by their very nature, adversarial professionals who often make a lucrative living from conflict. Furthermore, it is a sad fact of life that some lawyers will seize upon any opportunity to escalate or create new conflict through pride or financial drive. This means that a wife expecting a 50/50 split of assets might be advised to push for 70/30 in the hope of settling for 60/40 because they expect to be granted residency of the children; whilst the husband might similarly be advised to push for a 70/30 split in the hope of settling for 60/40 because he entered the marriage with the equity in a house bought before the couple met. Divorce cases often rack-up huge legal fees whilst each lawyer fights their client’s financial corner. If each partner approaches a solicitor with a view to drafting a Separation Agreement, unless both partners remain resolved to maintain tight control of their part of the negotiations, the risk is there that the solicitors will create additional conflict (intentionally or not) with its resultant emotional and financial costs.

2. Collaborative Family Law: This is a new approach begun by family lawyers in the US to manage the divorce process in a dignified and non-adversarial manner. See www.collablaw.org.uk for a detailed explanation. In the collaborative process, the partners’ lawyers and their clients agree in writing to reach settlement without court involvement. Four-way meetings are held with the couple and their lawyers talking around the same table, and everyone agrees to work together to resolve child and financial issues arising out of the separation. In addition, they may enlist the help of other experts such as child or finance specialists. In principal this approach should be more cost-effective and less stressful than the traditional approach, but in practice it still involves many meetings and reports, all of which have to be scheduled over a period of time and paid for at solicitor’s rates.

Dognut,
An excellent posting! Thanks for that. Lot of research there.

One observation

Division of matrimonial assets: In recent years (following White v. White), the Courts have been directed to aim for equality and fairness of asset distribution between divorcing couples, with the ideal of a 50/50 split being departed from only if there is very good reason to do so. Accordingly, when a Court is asked to decide how matrimonial assets should be fairly divided, the preparation of a financial settlement usually involves a long and expensive auditing procedure which is best avoided if at all possible. The financial settlement is not part of the divorce itself, so if the couple are cooperating amicably it can be worked out fairly between them without going to Court, bringing huge savings in time and legal fees on both sides.

My understanding is that the 50:50 rule applies for long marriages (10 years +). However, in shoert marriages (up to 2 years) it seems that each party takes out what they brought into the marriage, splitting equally any profit or loss made on assets during the period of the marriage.

Obviously you are looking at this, as you said, from your own personal perspective.

You will certainly save someone else a hell of a lot of time with this. Thanks again

Mike