Introduction
When a couple decide that that the marriage has broken down, one of the most pressing issues they face is ‘What happens to the finances?’ With divorce cases taking up to a year to get through to Decree Absolute, couples are naturally keen to resolve the finances as quickly as possible without waiting up to a year. For other couples there are further complications as they are separating on good terms and would rather a separation as opposed to a divorce but still need to sort out the party’s finances. Whatever the circumstances of the breakdown couples who wish to resolve the finances will encounter two scenarios; do they ahead with a Separation Agreement or a Financial Consent Order. We will discuss the pros and cons of both below.
What is a Separation Agreement?
A Separation Agreement is a written agreement between a married/civil partnered couple who wish to resolve the finances but either they do not want a divorce, or they do want a divorce but need to resolve the finances without having to wait for a Consent Order. A Separation Agreement is a legal document setting out what will happen to all of the matrimonial finances. The document is drafted by the legal representative of one of the parties, it is recommended that both parties should obtain independent legal advice upon the terms of the agreement. Once the agreement is signed, it is then classed as being ‘in force’ and so a Separation Agreement can be entered into without spouses having to apply for a divorce, or can be entered into in the early stages of a divorce.
Advantages of a Separation Agreement
The main advantage of a Separation Agreement is that parties do not have to begin divorce proceedings to enter into such an agreement. The only requirement is that they are currently married/civil partnered, and the marriage/civil partnership is coming to an end. A Separation Agreement can therefore be faster, and in some cases a lot cheaper, than going down the Divorce and Consent Order route. A further advantage is that the Courts are not legally bound to follow the terms of any agreement between a couple, however, providing certain rules are followed a Separation Agreement can be treated by a court as legally binding, T v T [2013] EWHC BS (FAM).
Disadvantages of a separation agreement
The main disadvantage of a Separation Agreement is that it is essentially just delaying the inevitable, as even with a Separation Agreement, the couple are still married to one another and so neither party can re-marry etc. Therefore eventually one party will have to petition for a divorce and under normal circumstances, the Separation Agreement will be turned into a legally binding Consent Order. Long-term this can work out being very costly, as the couple will have paid for a Separation Agreement and then have to pay for a divorce and consent order on top.
There is a risk with the effectiveness of such agreements, as a Separation Agreement is not automatically treated as legally binding by a Court, and so a couple can enter into a Separation Agreement but parties are under no obligation to follow those terms. Also one party could instead decide they are not happy with the agreement and make an application to the court to resolve the finances, in such a case the Court does have the power to disregard the Separation Agreement, or depart from it. This is because the agreement is not legally binding and so there is a risk that the court could order something entirely different.
The flip side is the danger that a Court could consider the Separation Agreement and find it to in fact be legally binding upon the couple. This could be a disadvantage to a party to the divorce, as divorce is a very stressful time and some parties can feel pressured into entering into a Separation Agreement early on in the separation, without having much time for reflection, obtaining legal advice or having proper financial disclosure. Some people can therefore enter into an agreement without properly considering matters and that Separation Agreement could then potentially be upheld by a court, meaning a party can end up with a bad deal.
A further disadvantage is that a Separation Agreement cannot deal with the issue of pensions and cannot create a Pension Sharing Order. Pensions are often one of the biggest assets of a marriage/civil partnership and so the inability of a Separation Agreement being able to deal with pension sharing is a major disadvantage. The parties will need the benefit of a Financial Consent Order to deal with pensions on divorce.
What is a Consent Order?
A financial consent order is a legally drafted document setting out all the terms of the matrimonial/civil partnership’s finances. The document is signed by the parties and then sent to the Court for judicial approval. Once approved by the court, the order is then legally binding. A financial consent order can only be obtained during divorce/dissolution proceedings and the parties must be at decree nisi/conditional order stage for a Financial Consent Order to be made.
Advantages of a Consent Order
The main advantage of a Financial Consent Order is certainty, as the majority of Financial Consent Orders will contain a clean break, meaning that the parties can make no further financial claims against each other once the order has been made by the court. This therefore draws a line under the matrimonial finances and allows a separating couple to move on with their lives.
A Financial Consent Order offers greater certainty than a Separation Agreement as whilst a Separation Agreement can, in certain circumstances, be considered legally binding, there is no such ambiguity with a Financial Consent Order which is always treated as legally binding once it has been made.
A further advantage of a Financial Consent Order is that it will only be made during divorce/dissolution proceedings, and so the Financial Consent Order can be approved and the couple can then obtain the decree absolute, meaning the divorce and finances will all be taken care of together, allowing closure on all issues.
Disadvantages of a Consent Order
The main disadvantage of a Financial Consent Order is that the parties must be going through a divorce to obtain one, and so even parties who do not wish to go through divorce proceedings, will have to divorce in order to get the Financial Consent Order. Furthermore, a consent order can be an expensive route. However, regardless of whether you go for a Separation Agreement or a Financial Consent Order, you will still be incurring legal fees in any event.
Which option to use?
The answer to this question depends on your needs and we would strongly suggest giving ourselves, or any legal representative, a call to discuss your options. Generally speaking, certainty is paramount and so we would normally advice that parties begin a divorce in order to get a Financial Consent Order.
This brings all matters to a conclusion and gives parties’ stability and certainty, knowing that they have in place a legally binding Financial Consent Order. With a Separation Agreement, these can often be rushed through after separation and parties may end up getting into an agreement which is not in their best interests.
The legal uncertainty of a Separation Agreement is a major disadvantage and can also be more costly, as parties will have to pay legal fees for a Separation Agreement, followed by eventual divorce and Consent Order fees and so just getting a divorce and Financial Consent Order after separation can be much better value for money.
If you wish to discuss the above issues then please contact us on 0117 992 6778 or pthomas@henriquesgriffiths.com. We are happy to act for clients under Fixed Fees in relation to obtaining an agreed Financial Consent Order and we are happy to discuss the same with you.
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