HM Insights

Your 'financial divorce' – what you need to know about Minutes of Agreement

When you separate, there will be lots of issues that need sorted out. Childcare arrangements, paying the mortgage and other household bills, dividing up assets and dealing with debts are just some of the typical matters separating couples need to resolve. Here, we look at some of the common questions people going through a separation have and what you need to know in relation to them.

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Do you have to go to court to deal with your separation?

No. Only a court can grant your actual divorce or dissolution. However, many couples do not have to ask a court to sort out childcare and financial issues. This is because they are able to agree suitable arrangements. There are different ways of reaching agreement and where you have not managed to agree directly with your ex-partner you can use dispute resolution methods including: negotiation via lawyers; mediation; and the collaborative process. We can give you more information on the different processes so you can be sure you are choosing the right one for you.

What happens when you do reach a mutually acceptable agreement?

You might have heard the term "Minute of Agreement" or "Separation Agreement". This is the name given to the contract drawn up by your lawyers which, once signed by both you and your former partner, will comprehensively resolve all of the issues arising from your separation. Once it is in place you can go on to divorce or civil partnership dissolution.

What can a Minute of Agreement cover?

In theory, it can include whatever you and your ex-partner agree should go in it.

Children - Typically, and where there are children, it starts by setting out arrangements for where the children live, for example stating who will be the children's primary carer and then the arrangements for the other parent to see the children (which can be worded on a general basis or go into much more detail, depending on circumstances), or that parents will share the care of the children.

It will often also contain provision for a non-resident parent to pay child support to the resident parent.

Ongoing financial support - It can contain provision for one person to pay the other ongoing financial support (known as aliment or periodical allowance). It will set out the amount to be paid and the duration. Usually, it will contain provision for a review in the event of a material change in circumstance of one or other of the parties. So, if you have agreed to pay £1000 for 12 months and then you lose your job, the review provision will be triggered.

Division of assets - The Agreement usually then goes on to deal with the division of the assets, taking into account any debts. Often, the couple will own a house together. They will have agreed whether the house is to be sold, or transferred to one or other, or will remain in joint names for a period of time. The Agreement will set out the process by and timescale in which that agreement can be implemented, together with details of how sale proceeds are to be divided or payment of money in exchange for receiving the other person's share of the house.

One party may have agreed to pay the other a capital sum in order to equalise the net value of their respective assets. The Agreement will set out a payment timescale and will often state that interest will run in the event of late payment.

Other assets - There will often be other assets, such as business interests, pensions, shares, bank accounts and investments. There will probably also be debts to be factored in too. There may be tax implications where assets are being transferred. The Agreement is a bespoke document and your lawyer will ensure that it covers everything you need.

Standard clauses - The Agreement ends by containing various standard clauses. They are designed to reflect that the Agreement is intended to be in full and final settlement, and to limit the possibility of a challenge being made to its terms at a later date. The standard clauses are designed to protect you.

Is the Minute of Agreement fully binding once signed?

Generally, yes, but not always.

Sometimes, and in relation to the financial aspects, enforcement action has to be taken to compel a party to do what s/he had agreed to do. Take the example of one person agreeing to pay the other a sum of money within a set period of time. If s/he fails to do so then the other party may have to enforce payment, for example by instructing sheriff officers to serve what is known as a "charge for payment" on the non-payer. Ultimately, sequestration (bankruptcy) proceedings might have to be undertaken. There is a cost involved in having to take these steps but at least the remedies are there. At Harper Macleod we can advise you on the best and most cost-effective option for you.

Setting out the care arrangements for children of a relationship is a very useful gauge of what parents thought was a good arrangement at the time of signing the Agreement. However, that does not mean those arrangements are set in stone. Often, especially where children are young, the arrangements change over time. Often, in that situation, parents will just agree themselves on the new arrangement. They might want that put into a supplementary written Agreement. Sometimes, though, agreement is not possible. If a parent refuses to allow contact (whether for well-founded reasons or not) then the other parent may have to apply to Court in order to get an order for contact. The court will consider what would be in the best interests of the children in deciding what, if any, order to make.

Where the Agreement refers to child support payments, that part is theoretically only binding for one year following signature of the Agreement. Thereafter, either parent can (though they do not have to) apply to the Child Maintenance Service for a maintenance assessment, which once in place will supersede the child support provisions in the Agreement.

Sometimes, the Agreement will contain provisions which are aspirational rather than easily enforceable. An example would be where the couple own a dog and after separation one person keeps the dog but the other wants to continue to be able to see the dog. Whilst it is perfectly possible to include wording for that to happen, if the dog's main carer refuses to stick to the arrangement, enforcement would be tricky and likely very costly.

In rare cases, there may be the possibility of challenging the Agreement on the basis it was not fair and reasonable at the time it was entered into. The test for this is a high one. The leading case on this is Gillon v Gillon and it sets out the factors which the court will look at. A more recent case, Bradley v Bradley, has reinforced the difficulty involved in successfully overturning an Agreement. An example of where a challenge might be made relates to disclosure. The Agreement will generally contain standard wording emphasising the importance of parties making a full disclosure of relevant assets and debts. If it subsequently came to light that an asset had not been disclosed, then the Agreement could be challenged, and even overturned.

Key points to remember

The Minute of Agreement is a very important document. Some people refer to it as akin to your financial divorce. It is vital that before signing it, you fully understand what it covers and that you feel its terms are fair and reasonable. Once signed, and except in very rare circumstances, you will not be able to alter the financial arrangements, for example to ask for more or to pay less. A carefully drafted Agreement will stand you in good stead over the passage of time and will protect you even where the other person has been a reluctant participant in the separation process.

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If you would like to find out more about these topics and how we could help, please get in touch.

 

The small print: This blog is for information purposes only and should not be construed in any way as providing legal advice.