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Introduction to Ontario Separation Agreements: What to Know Before You Start

What is a separation agreement?

  • A separation agreement is a contract between two people who used to live together and are now living apart.
  • The separation agreement can explain each person’s rights and obligations upon their separation, including:
    • Any issues regarding property and its division (ie: Who keeps the car? Are we selling the house? Do we have to share our bank accounts?)
    • Financial support for each other or any children of the relationship;
    • Who is responsible for caring for the children?
    • Where will the children live?
    • Any other issues that might come up as a result of the separation.

Do I need a separation agreement?

  • No one needs a separation agreement to be legally “separated”. Once you or your spouse has decided to separate, and have no intention to resume your relationship, you may be considered separated – even if you’re living under the same roof.
  • A separation agreement provides the peace of mind of knowing that your issues have been settled.
  • Having a clear understanding of what your rights and obligations are to your former partner or spouse can reduce tension and conflict that often arises during this difficult time.

Can I do it myself?

  • You do not need to have a lawyer draft your separation agreement.
  • A separation agreement is considered a legally binding contract if it is signed by both parties, in the presence of a witness, and dated.
  • There are many reasons why you may want to hire a lawyer however. For example:
    • In order for your agreement to “stick”, you must understand the interplay between the legislation that governs these types of agreements, to ensure your agreement is written in accordance with the law;
    • To get a full understanding of what it is you are exactly “agreeing” to; and
    • To understand the full scope of your rights under the Family law.
  • If you are thinking of doing your separation agreement, make sure you:
    • Are thorough in what you cover in the agreement;
    • Are precise in the language use, to avoid multiple interpretations of the agreement in the future;
    • Confirm the facts, and ensure that all dates, names, account numbers, addresses, etc., are listed accurately;
    • Are specific in listing all assets – Individual or family assets should be itemized and described in great detail, to avoid uncertainty and confusion;
    • Avoid using a “kit” – it is dangerous to use any precedent unless you fully understand its meaning and the legal implications; that’s what lawyers are for;
    • Avoid using “boilerplate” clauses; make sure that the clauses cover your particular circumstances specifically;
    • “Predict” the future; make sure your agreement gives you a mechanism of addressing any possible changes in the future;
    • Are realistic; any provisions in your agreement that are unrealistic or too difficult to abide by should be avoided Unrealistic clauses open both parties up to a breach of the agreement, and potential conflict.
    • Have the agreement review; a second opinion by a trained professional may bring matters to your attention that may have been overlooked.

How can I make sure my agreement is valid?

  • Once you have decided to have an agreement completed, you want to make sure it is valid, and that it will stand up to scrutiny by the Court, if the agreement is ever disputed.
  • Make sure you are open and provide full disclosure to your spouse
  • Make sure it is freely negotiated – If one of the spouses exerts undue pressure on the other one, if the relationship is characterized by one party being psychologically or emotionally dominant over the other, or if the separation agreement was signed in a situation involving duress, then a court will likely strike the agreement down.
  • Get independent legal advice.

 

Top 10 Tips on Drafting Domestic Contracts

Any domestic agreement (which in Ontario can include a marriage contract, cohabitation agreement or separation agreement), must be drafted with great care and attention to detail. After all, it is a binding legal contract that – when done right – will govern the rights and responsibilities of the spouses or relationship partners who have entered into it.

At the risk of stating the obvious: If you want a good, airtight domestic contract, you should see an experienced lawyer who specializes in Family Law. Among other reasons, this is because the provincial Family Law Act that governs many of the matters that are purportedly covered by domestic contracts, and it is vital to understand the interplay between the legislation and any agreement you may reach with your spouse.

But before you consult a lawyer, here are some tips that we can provide in order to help formulate the types of issues you want to address in your own domestic contract, and to help you understand and navigate the agreement-drafting process:

Tip 1:Be Thorough

Any good domestic contract must cover all the legal points, avoid inadvertent loopholes, and withstand the passage of time. It should also contemplate certain tangential implications (such as income tax consequences), and should provide for a mechanism by which any disputes are to be resolved.

Tip 2: Be Precise

The agreement must also be in clear precise language that you and your spouse can easily understand and follow. Legal jargon – or “legalese” as it is sometimes called – should be avoided; this includes old-fashioned terms such as “party of the first part”, “aforesaid” and “hereafter”.

Tip 3: Confirm the Facts

Makes sure that the statements and pre-suppositions that form the basis of the agreement are factually correct. This includes obvious things such each spouse’s legal name and the address of any homes or recreational properties; but it also includes making sure that any dates or date-ranges, business addresses and bank account numbers referred to in the agreement are reflected with precision.

Tip 4: Be Specific

Individual or family assets should be itemized and described in great detail, to avoid uncertainty and confusion. This naturally includes physical tangible objects, but can also include more esoteric items such as corporate shares, interests in timeshare properties, etc. It is wise to include long lists of items in a Schedule to the agreement rather than the main body, to avoid cluttering the main part of the agreement, and to allow for easier amendment of those lists if necessary.

Tip 5: Avoid the Kits

There are some domestic agreement “kits” on the market, that purport to provide legal clauses that can be customized to suit. However, these should be avoided, because One Size Usually Fits None. Indeed, it is dangerous to use any precedent unless you fully understand its meaning and the legal implications; that’s what lawyers are for.

Tip 6: Avoid Boilerplate, Too

Similarly, even if you avoid the pre-fabricated agreements, it’s important to beware of using standardized “boilerplate” clauses, that are drafted broadly and aimed at covering off a wide range of scenarios and contingencies. Only rarely will these provide the best coverage of your unique situation.

Tip 7: Try to Guess the Future

The agreement should contemplate that there may be gradual changes over time, or that certain likely events may arise in the future. These might include changes in custody, or the re-marriage of one or both spouses, for example. These kinds of potential scenarios should be discussed with your spouse and reflected in the agreement whenever possible.

Tip 8: Watch Out for Loose Ends

In tandem with the need to address future contingencies is the need to identify “loose ends” and “loopholes” in the drafted agreement. This is another area where the advice of a good Family Law lawyer is particularly helpful.

Tip 9: Be Realistic

Although the agreement should be comprehensive, it cannot possibly purport to govern every aspect of either spouse’s day-to-day living. Terms or obligations that are unrealistic or too difficult to live by will be the first ones that get breached, with a dispute between spouses being the inevitable consequence.

Tip 10: Get it Reviewed

Most domestic agreements are drafted during a point in time when the two of you are in a positive, happy, pro-relationship headspace (e.g. in the case of pre-nuptial contracts or cohabitation agreements), and it’s precisely the time when many important matters can get overlooked, glossed over, or brushed aside as “unimportant”. It’s therefore particularly important to have such agreements reviewed by a lawyer specializing in Family Law: Not only will that lawyer know the law and apply a trained eye to the wording of the document, but he or she will emphasize the need for each of you to get independent legal advice.

These tips are just a starting-point, but they go a long way toward making sure that any domestic contract that you draft will have the intended effect between you and your spouse. This in turn will avoid disputes – or worse, having the agreement (or parts of it) be overturned by a court.

Be Careful When Negotiating Separation Agreements – You May Be on the Hook Longer Than You Think

Domestic contracts such as separation agreements between spouses will usually attempt to address the repercussions of any future changes to the parties’ respective situations – for example, what happens in the event that one or both of them have lost their jobs, have a lasting illness or disability, or have married someone else.

Needless to say, it is difficult to predict the future, and even more so in the context of trying to address the repercussions of such unforeseen changes on the parties support obligations to each other.

A recent case from the Ontario Superior Court of Justice illustrates the pitfalls that can arise in this context.

In Greffe v. Greffe, the parties had been married for 25 years when they separated. The husband had been the primary wage-earner throughout the marriage, currently earning about $150,000 as a steel mill foreman and municipal councillor. The wife had stayed home in the traditional homemaker role, to care for their children.

At the time of separation, they negotiated a separation agreement which in 2008 was incorporated into a final divorce order. The provisions of that agreement and order obliged the husband to pay the wife $2,000 in spousal support until 2017, when the wife reached the age of 60. In agreeing to this arrangement, the wife chose to forego receiving an additional $5,000 per month that she would be currently entitled to in combined child and spousal support, given that the youngest child lived with her and was still financially dependent. Equalization between the parties was also waived as part of this settlement.

Subsequently, the husband subsequently lost his job at the steel mill, and was not re-elected as municipal councillor. As a result, his income went from $150,000 in 2009, to about $97,000 in 2010 (including the severance package he received from his former employer). He was now earning $45,000 at a new job, and still had a long way to go before he would be entitled to his pension.

In light of his changed circumstances, the husband brought a motion to the court to have the support order and underlying separation agreement varied.

The court reviewed the terms of that separation agreement, which it characterized as “remarkably rigid on the issue of the spousal support obligation and its irrevocability”. It noted that the husband’s job loss was one of the four stipulated factors that could compel a reduction in spousal support, but pointed out that this event could not be considered in isolation.

Indeed, after scrutinizing the husband’s pension entitlement, the court observed that the husband’s early job loss had not actually affected his pension entitlement. He was still entitled to receive the pension at the same time and at the same age as if he had not been let go.

More importantly, the mere fact of his job loss had not amounted to the “material change in the circumstances” that the agreement expressly called for as a pre-condition to it being varied. The fact that the husband lost his steel mill job was not unforeseeable: the agreement specifically contemplated precisely such an eventuality and in fact had a formula for reviewing spousal support in such an event.

(The court also pointed out that despite the significant drop in the husband’s annual income, he had continued to take frequent trips and had purchased a $45,000 car. While commenting that the husband was entitled to lead the lifestyle that he chose, the court said he did so “at his own” peril, and noted that the wife should not be penalized for his failure to set aside a reserve from which to draw if his income changed).

Simply put: While the parties’ separation agreement envisioned that the husband might experience a significant reduction in income – and directed a reduction in his support obligation pursuant to a strict formula if that happened – in this case the threshold that had been agreed by the parties have not been met. The agreement had been reached with the benefit of legal advice on both sides, and was effectively water-tight. The court accordingly dismissed the motion.