What are the possible repercussions of a long-term separation without a divorce?

It is not uncommon for couples to separate but remain legally married. Ordinarily this arrangement will only be for a limited period of time during a ‘transition period’, however, in some circumstances separated couples can remain married for several years, if not decades.

Separated couples may be unaware that by remaining married for these extended periods they are exposing themselves to significant risks which could affect their property rights, financial obligations, and future inheritance claims.

This article examines those risks as well as the legal rights of separated couples under the current law in England and Wales and ways that those risks could be mitigated.

Why choose separation over a divorce?

There are a number of reasons why separated couples may choose long-term separation over a divorce. For example:

• Not deeming it necessary. Some individuals do not believe that a formal divorce is required if they are already living separate and apart and neither of them have immediate plans to remarry. Others may have the intention to divorce in the future but just haven’t found the time to formalise matters.
• Due to religious or cultural beliefs. It is not unusual for divorce to conflict with an individual’s personal beliefs or religious values.
• Due to emotional reasons. Some couples may find it difficult to address the finality of a divorce and prefer to delay the formal end of their marriage for as long as possible. In some cases where young children are involved individuals may choose to remain married to postpone resolving the financial settlement if it is likely to impact the children.
• Financial considerations. By remaining married couples may continue to have access to certain benefits such as health insurance, pensions or tax advantages.

Whatever the reason for remaining married it is important that couples are aware of their rights and the risks during this period as well as their legal entitlements should they divorce, both now and in the future. These include the following:

Property Ownership

Unless legally resolved, property which is owned by one party or the other is still considered a marital asset. This can include property that is owned in the joint names of the parties and in some cases property that is legally owned by one party.

Where parties separate and one party moves out of the property disputes can arise over the contributions made towards the mortgage payments or the maintenance of the property, both of which can have an impact on the value of the property or the balance of the equity.

Joint debts and shared financial obligations will continue to bind both spouses. Where there is a mortgage secured against a jointly owned property the parties will be jointly and severally liable and any arrears that accrue will be recoverable from them both, even if the default in payment is the fault of only one of them. Arrears in the payment of the mortgage could not only impact both parties credit ratings and potentially make it more difficult for the parties to obtain finance in the future, but it could also result in the mortgage lender seeking possession of the property to clear the mortgage debt owed.

Debts in the sole name of one party could also impact the other party where there is jointly owned property. If an individual is made bankrupt, the trustee in the bankruptcy could pursue recovery from the debtor’s share of the equity in the property.

Financial obligations

If one party continues to provide financial support to their spouse, whether that be via the continued payment of the mortgage or the outgoings of the household, the spousal maintenance obligations may persist. Where one party remains financially dependent on the other during the lengthy periods of separation it can create additional complications, particularly if the dependent party has been out of work for a long period of time or is approaching retirement age and will have limited ability to become financially independent.

Where there are dependent children, parents will also have child maintenance obligations which will endure until the children reach the age or 18 or complete their secondary education.

Inheritances, windfalls and investments

When determining the financial settlement in a divorce the court will look at the assets of the parties at that date and not the date of separation. The property and assets accrued during the period of separation will remain vulnerable to claims in the future, including windfalls like profitable investments, inheritance or lottery winnings.

Pensions

Spouses will retain claims against each other’s pensions until a financial settlement is reached within a divorce. This will include claims against the entirety of the pension pot and it will not be an automatic conclusion that the court would only consider the pension accrued during the period of time the parties were together.

If there is a need for the sharing of all pension assets, whether that be due to the low value of non-pension assets or the other party having limited pension assets and consequently low income prospects in retirement, then there is a significant risk that the entirety of the pension pot will be shared.

Inheritance Rights

Under the Intestacy rules separated spouses will retain the right to receive an inheritance from each other’s estate unless the deceased’s Will specifies otherwise. Even in the instances where a Will has been updated to exclude the separated spouse the spouse could have a claim under the Inheritance Act for a share of the estate if they continued to be maintained financially by the deceased.

Practical steps for parties to a long-term separation

Divorce

Divorcing and reaching a financial settlement with a clean break order is the only way to completely sever financial ties and prevent future claims on assets or income.

Couples that have been separated for a lengthy period of time or are considering long-term separation in lieu of a divorce should consider the risks and establish whether it is better to finalise the divorce now to avoid the potentially costly and protracted disputes in the future.

Judicial separation

A judicial separation is not a divorce, and parties will continue to be legally married. The court will have the power to make orders regarding finances and children; however, these financial orders are limited and will not allow for pension sharing because pension sharing orders can only be implemented upon the court making a final divorce order. By excluding pension sharing parties can be put to a significant disadvantage.

Prepare a separation agreement

If a divorce at this stage is not appropriate but is likely to occur in the not too distant future parties may wish to consider a separation agreement. A separation agreement is a legally binding document which outlines the division of assets, financial responsibilities, and can even detail the arrangements for children. Whilst separation agreements are not enforceable like a court order, the court can be persuaded to uphold such agreements if they are entered into voluntarily and fairly.

As with judicial separation, separation agreements cannot allow for the implementation of a pension sharing order. The parties can record their agreement that there will be a pension sharing order as part of the financial settlement within the future divorce, however, if either party to the marriage were to die before the pension sharing order was implemented then those rights would be lost.

For this reason, separation agreements would not be appropriate in matters where pension sharing is required and divorce would be the best option.

Update your Will

By updating your Will you can ensure that your intentions concerning the inheritance of your assets are accurately reflected.

Protect future assets

All assets and income generated during your separation will be vulnerable to claims by your estranged spouse until a financial settlement is reached within a divorce. By taking advice on the ways in which these assets could be safeguarded, such as through the creation of a trust, you could reduce the risk of these assets being subject to sharing within a future divorce.

Conclusion

It is understandable that a long-term separation without divorce may feel like a more appealing option for separated couples that want to avoid the emotional and financial challenges of divorce. This course of action does however carry great risks and the potential for the sharing of assets which may otherwise be considered non-matrimonial if the divorce was actioned sooner. It is possible to mitigate some of those risks by formalising the financial arrangements through a separation agreement, by updating Wills, and through the careful management of finances. It is important to note that these measures will not be binding on the court and that true financial separation can only occur within a divorce and by obtaining a clean break order.

How Pinney Talfourd can help

If you are contemplating separation instead of a divorce or have been separated from your estranged spouse for a long period of time, please contact a member of our family team to book a free initial 45-minute consultation to discuss your matter.