When parties separate one option open to them is to enter into negotiations with their former spouse to deal with such matters as occupation of the matrimonial home, ownership and division of the matrimonial assets, including properties, pensions, savings, policies, incomes, claims and inherited assets, as well as resolving division of any debt and dealing with issues of maintenance and care of the children.
An agreement of this nature can only be achieved if both parties are willing to engage in such discussions. It is imperative that both parties have their own separate independent legal representation during the process. A matrimonial agreement has the advantage of providing a conciliatory approach to the settlement of the financial affairs of separated spouses, as opposed to embarking upon contentious court proceedings.
A matrimonial agreement will not be binding and conclusive without each party having received full, proper and independent legal advice as to the nature and extent of their entitlement. Both parties would normally be expected to declare that they have had such legal advice and they would sign the agreement in the presence of their solicitor after receiving such advice.
If either party does not make full disclosure of all their assets to the other party, any matrimonial agreement signed under these circumstances can potentially be set aside by the Court upon an application by the aggrieved party. Accordingly before a matrimonial agreement can be drafted, a full and frank exchange of information must take place so that both parties are fully informed before entering into the agreement.
Discovery that is required to be exchanged would include;
- A valuation of less than 6 months vintage for any property in which either party has an interest
- Up to date mortgage redemption statement for any property
- A P60 for the last 12 month period
- Statements for all bank/ building society accounts for the last 12 months
- Pay slips for the last 12 months
- Details of all policies, ISAs, stocks, share, investments etc
- An up to date statement of the all pension entitlements, either occupational or private (the Cash Equivalent Transfer Value of any pension is usually required)
- Sometimes additional information will be required such as credit card statements, loan accounts, details of any pending claims, inheritances to be acquired or received during the marriage.
Legal representatives will then review the discovery from both parties and negotiations will then commence.
If negotiations are successful and agreement is reached the terms and conditions of the agreement are drafted and each party signs in the presence of their own legal representatives who will witness their signatures. The legal representative who draws up the agreement will normally undertake to make the document a rule of Court as part of any subsequent divorce proceedings.
A matrimonial agreement, once it has been signed by both parties, has very significant legal and financial implications for each party. Providing both parties are of sound mind when signing an agreement and providing full disclosure has been made under the discovery process and there have been no other deficiencies in the process of finalising the agreement, the following consequences are likely to arise:
Claims– Neither party will be able to make a claim against any property or assets in the other’s name in the future unless the agreement allows this to happen.
Future Expectations– Both parties in effect waive their rights to any claim on the future expectations of the other including possible increases in the value of business assets and salaries and an inheritance or other windfalls arising to the other party.
Death– Neither party will be able to make a claim against the estate of the other under the Inheritance (Provision for Family and Dependants) (NI) Order 1979 unless the payment of maintenance has been provided for in the agreement or the agreement allows such a claim to otherwise be made.
Tax– Neither party may claim the benefit of the married couple’s allowance against their income tax liabilities. The loss of the spouse exemptions available in relation to Inheritance Tax and Capital Gains Tax liabilities considerably increases the potential for tax to be paid on the disposal or gifting of assets in the future.
Contract– Neither party will be able to contract in the name of the other and any debts accrued by either party will have to be indemnified by the person who accrued them.
Pension Rights– Husbands and wives have rights to succeed to their spouse’s pension rights e.g. half on the death of a spouse. Each has expectations of enjoying a standard of living supported by the pension of the other. The matrimonial agreement may exclude any such future claims or expectations.
A clause can be inserted in the matrimonial agreement with regards to how and when divorce proceedings can be issued. As a part of the divorce proceedings an application will be made on the date of the divorce hearing to make the agreement a ‘Rule of Court’ or an ‘Order of Court’. This means the original agreement is lodged with the Court and is thus enforceable through the Courts so if any part of the agreement is breached an application can be made to refer the issue back to the Court to be remedied. When you marry you enter into a contract, recognised by law, having implications in relation to your assets, your pension rights, your tax and other liabilities. When you sign a matrimonial agreement you are entering into a contract to end many or all of those rights as well as your obligations and responsibilities. You must be sure you are completely satisfied that everything you wish to have dealt with is covered by the agreement in a manner with which you are satisfied before you sign it. It is for this very reason that a Matrimonial Agreement is a very valuable document for parties separating.
If you need advice or assistance in relation to any legal issue pertaining to a relationship breakdown, contact our family department on [email protected] or ring the office on 028 9181 1538 to discuss in confidence.
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