What is a Separation Agreement?

Bill and Melinda Gates use separation agreement to divide finances

Bill Gates, one of the world’s richest men, and his wife of 27 years Melinda, have decided to divorce, and with assets worth an estimated $130 billion, this is likely to be one of the largest divorce settlements the world has seen.

It is understood that prior to announcing their divorce they have already agreed upon how to divide their marital assets and have had lawyers prepare a separation agreement setting out what those arrangements are.

What is a separation agreement and how is it used in the UK?

A separation agreement is an agreement made between parties who are contemplating imminent separation or have already separated.

The agreement sets out the agreed financial arrangements during the period of separation and how a couple’s finances should be divided in the event of subsequent divorce or dissolution.  It is usually used by persons who are married or in a civil partnership, although cohabiting couples can enter into a separation agreement.

It is important to note that a separation agreement does not end a marriage.  If the parties wish to divorce or have their marriage dissolved, then one of them will need to issue the divorce or dissolution proceedings.

Is a separation agreement the same as a post-nuptial agreement?

Separation agreements should not be confused with post-nuptial agreements.

A post-nuptial agreement is an agreement made between two married individuals, who intend to stay married, but wish to agree how their assets are to be divided between them if they later separate or divorce.

The difference is that a separation agreement contemplates imminent separation, whereas the parties to a post-nuptial agreement do not usually wish or expect to separate in the near future.

However, a separation agreement is usually drafted in contemplation of the breakdown of the relationship. For further explanation of nuptial agreements see our “Family Bulletin 10 Nuptial Agreements”.

When would a separation agreement be used?

Individuals who do not wish to divorce in the near future may wish to make arrangements in relation to financial matters during their separation.

Common scenarios are when the parties have not been married for a year and so cannot start divorce proceedings because of this (divorce or dissolution petitions cannot be filed with the Court until the parties have been married or in a civil partnership for at least 1 year) or they do not have sufficient grounds for divorce.

The parties may also wish to separate but do not wish to divorce for religious or personal reasons.

Alternatively, the parties may wish to wait to issue divorce or dissolution proceedings so that they can instigate them on the basis of 2 years separation and in the meantime, they wish to regulate how financial matters are dealt with.

However, it should be noted that the only way to achieve finality and a ‘clean break’ (and avoid any future claims being made against you),  is by way of a Court approved order (called a consent order if made by agreement between the parties) within divorce or dissolution proceedings. Therefore, legal advice should be sought to determine which option would be best depending on the circumstances.

Are separation agreements legally binding?

A separation agreement does not have the same finality as a consent order because a separation agreement cannot exclude the Court's jurisdiction in financial remedy proceedings on divorce or dissolution in the future.  

Either party can apply to the Court for financial orders and ask the Court to ignore or modify some, or all, of the terms of the separation agreement. The only way to prevent a party from attempting to change the terms of the separation agreement is to convert the agreement into a Court order.

That said, if both parties receive independent legal advice about the terms of the separation agreement and engage in financial disclosure, although the Court is not bound by the agreement, it is highly likely to uphold it, unless there has been a change in circumstances since the agreement was signed or if it fails to make adequate provision for a child of the family.

In conclusion, separation agreements can be extremely useful as the parties can agree their own terms amicably and without the court imposing a decision on them.

They can be prepared relatively quickly, and you can be assured that the Court is likely to uphold the provisions so long as the above criteria is met which means assets can be protected.

However, there is still some degree of uncertainty for the parties because they cannot achieve a clean break and having the agreement does not prevent either party from issuing financial remedy proceedings which leads to increased costs and stress for them both.

The Gates’ separation appears to be an amicable one given they have confirmed they will continue to work with their charitable foundation together, which is not always possible when parties separate.

The Family team at Parfitt Cresswell are all members of Resolution which means we adhere to a code of conduct to assist parties in an amicable, non-confrontational and cost-effective manner. Whether your separation is an amicable one or not our experts are here to advise you throughout the process.

To assist you we are offering complimentary initial consultations with our team of family law experts.  To take advantage and arrange your no-obligation consultation simply call 0800 999 4437 today or email enquiries@parfittcresswell.com and a member of our team will be happy to assist you.