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What is a Separation Agreement & Why Do You Need One?
- The Divii Team
- Jul 24
- 7 min read
Updated: Nov 17
Understanding what a separation agreement is and why you need one is one of the first steps in navigating your separation.
What is a Separation Agreement?
A Separation Agreement is a legally binding document that outlines your parenting arrangement, Child Support and Spousal Support Agreements, as well as property distribution and equalization payments. This document is what you will file to the courts along with your divorce application when you file for divorce.
Why you need a Separation Agreement?
When people first start out, they often don't realize they need a Separation Agreement before moving on to the divorce process. Obtaining a Separation Agreement is actually the main component of your separation.
If you and your former spouse have children and/or property together, you will need a Separation Agreement. It's a written record of the agreements you make and ensures that you both understand how you are dividing property, the amount of financial support that may be paid, and what your parenting arrangement is. This helps prevent a disagreement in the future and serves as a written record for any disputes that could arise.
Other professionals will need your agreement to facilitate the various transactions outlined in your financial settlement. Your separation agreement serves as instructions for lawyers, financial advisors, and lenders. A bank will not extend funds or refinance unless there is a signed agreement showing a finalization of the financial matters between you. A financial manager will not split your RRSP funds if it is not outlined in your signed Separation Agreement.
What's included in a Separation Agreement?
Because it's hard to know exactly what a Separation Agreement looks like, we've outlined what's typically included in a separation agreement. While this is not an exhaustive list, it can help you wrap your mind around what a Separation Agreement is.
Recitals
The recitals are the clauses of the agreement that outline the facts on which you've made your agreement. It generally will introduce a schedule of all of the assets and debts you hold, the names and ages of your kids, and any other basic ideas that represent a snapshot of what life looks like at the end of the relationship. It will also outline how you made the agreement – by negotiation or mediation – and what main ideas you considered as part of your discussions. The rest of the agreement contains the sections that explain what the new agreements are arising out of the separation.
Parenting arrangements
The parenting section will include all the decisions you made regarding your co-parenting agreement. There are two main parts of a parenting plan to think about:
How will you communicate and make decisions as co-parents, and
How will you share time with your children.
The following questions are typically addressed in this section:
Will you have a joint parenting arrangement, or will one parent have sole guardianship?
How will you keep each other informed? By text message, weekly email, or shared calendar?
How will you make decisions about things concerning the children?
What type of parenting time schedule will you have?
What will you do for holiday, school breaks, and special days?
There are many other details that will be included in a parenting plan and it can (and should) be tailored to the needs of your family and meet the overall best interests of your kids.
Financial support
Child & Spousal Support
Once you've calculated support and come to an agreement, this section will outline final decisions made around child and spousal support. Answers to the following questions are typically included in this section:
How much will each party be paying?
What day will support start, and will you review it each year?
What types of special expenses do you need to factor in for the children?
Child and Spousal support are calculated based off of your individual income and all the details about how much and when support is paid will be outlined in this section.
Medical coverage
This section will address whether either of you will continue to cover each other or your children under your extended medical plan. If you do have medical coverage, it is typical to continue to hold it for your children. Whether you can continue to hold it for your spouse often depends on the terms of your individual policy.
Life insurance
This section will outline whether either of you will maintain or obtain life insurance as security for spousal and/or child support. It is good practice, though not a legal requirement, to secure support with a life insurance policy if you have one.
Assets & debts
Under the law, all property that you or your spouse own, whether it’s in your name, their name, or joint names, is shared equally between you, unless it qualifies as an exclusion (we’ll cover that below). The word “property” might make you think just of your house, but legally, it includes everything you own or owe: your home, vehicles, bank accounts, investments, pensions, and even debts like credit cards or lines of credit.
When it comes to dividing property, there are generally three main ways to handle each item:
one spouse keeps the property and buys the other out;
the property is sold and the proceeds are divided; or
both spouses continue to co-own it for a period of time.
You can make different decisions for each asset or debt. For example, you might decide to sell the house, one of you keeps the car, and you close the joint bank accounts. The important thing is that you make a plan for every individual item so that nothing is left hanging.
The key idea is that it’s all part of the shared “family property.” So if one person keeps an asset, or takes on a debt, the value of that gets factored into something called an equalization payment. This payment is meant to balance things out so that, in the end, each person walks away with their fair half of the total value. Instead of selling everything and splitting the cash down the middle, an equalization payment allows you to trade items, offset values, and settle up with one overall figure that makes things even. Divii will calculate this automatically for you.
Family residence and other real estate
If you own a house or other real estate, this section will outline decisions about whether you will be transferring ownership to one party or selling the family home. Sometimes separating couples choose to co-own the house for a period of time when they can't afford to buy it out, but still want to maintain stability for the children. The terms of any arrangement need to be considered and outlined in this section of the agreement.
Pensions & CPP
If either of you have pensions, this section will outline your decisions around keeping them individually, buying it out, or dividing them. It is well established law that the proportionate share of your pension that was accumulated during the relationship is divided equally with your spouse. Usually both spouses have CPP plans and so the CPP credits accumulated by each of you in the relationship are equalized for that period.
Financial accounts and assets
This section will address the accounts you own both jointly and separately, what will you do with them and how will they be divided. It is easiest to keep the accounts that are registered in your own name (there's no need to transfer the account or close it). With joint accounts, you may be able to transfer it to one party or you may need to close the account - it depends on your bank's policy.
It will also address if you will be keeping or equalizing the amounts in your RRSP accounts. You can transfer RRSP funds between spouses upon a separation without triggering taxes.
If you have an RESP, it will address what you will you do with it upon separation and what will happen to the RESP account if your child hasn't used the full amount by a certain age.
Vehicles
This section will outline decisions around your vehicles, and whether you will each keep the vehicles in your name. It will also address if there any vehicles in both names that need to be transferred to one name.
Debts & liabilities
This section will address what you will do with your debts and other liabilities, who will retain responsibility for the debt or whether you will pay off now or continue to share monthly payments.
Excluded Property
Under BC family law, certain types of property are considered excluded, meaning they don’t get divided equally between spouses. Excluded property generally includes:
the value of any property you owned before the relationship began;
the value of gifts or inheritances received by one spouse during the relationship;
money you received as damages or compensation, such as a personal injury settlement, except any parts related to past income loss;
insurance proceeds;
property that you acquired from the sale or exchange of other excluded property, for example if you sell a house that has an excluded component and then use the funds to buy another home the exclusion still exists; and
trust property that a spouse is a beneficiary of, provided it wasn’t contributed to during the relationship.
The important thing to remember is that while the excluded value itself isn't shared, any increase in its value during the relationship is typically considered family property and shared equally. The law is designed to ensure that what you brought into the relationship remains yours, but the growth or wealth you built together is divided fairly.
Conclusion
It can certainly be overwhelming to look at all of these questions at once, but you don't have to have answers to all of them right away. Knowing what a Separation Agreement is and what it typically includes will help you be less overwhelmed when it comes time to discussing the terms of your agreement. There are certain steps to follow and certain key pieces of information to gather before you'll be ready to figure these things out. But, if you exchange all the right information and all the cards are on the table, and you have a good understanding of the law, then with the right tools, it will be much easier to finalize a plan.
Learn more the Steps to Follow to Prepare your Separation Agreement: Preparing to Negotiate the Financial Parts of Your Separation Agreement
All content on Divii.ca is meant to provide general information about separation and divorce and is not and should not be considered legal advice. It's always highly recommended to seek independent legal advice from a lawyer during your separation.
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