You’re entering into a new relationship, how do you protect your property, including animals, from your de facto partner or spouse?
If your de facto relationship or marriage ends, how your property is divided is determined by the Property (Relationships) Act 1976 (the Act). The Act applies to de facto partners and married couples.
If you’ve been in a de facto relationship or marriage (or a combination of the two) for three years or longer, the starting point under the Act is an equal division of relationship property. Relationship property is the property that you and your spouse/partner have acquired or used together during the relationship, or property that you have acquired from wages earned during the relationship. Separate rules apply if you have been in a relationship for less than three years.
The Act allows couples to enter into an agreement to change the equal sharing regime (“Contracting Out Agreement”). A Contracting Out Agreement allows you to decide at any time before or during the relationship how your property is to be divided in the event your relationship ends in separation or death.
The Contracting Out Agreement must meet the formalities prescribed by the Act which are:
- The Agreement must be in writing.
- The Agreement must be signed by you and your partner/spouse after you have both received independent legal advice from different lawyers.
- Your respective lawyers must certify that you understand the effects and implications of the Agreement.
Your lawyer will need to obtain information about the extent and value of any property owned by you and your partner, in order to advise you about the implications of signing the Agreement. They must also be in a position to advise you on what your entitlement would be under the Act if you didn’t sign a Contracting Out Agreement.
A Contracting Out Agreement can be tailored to meet individual needs, as in this example: Joe Bloggs has been in a de facto relationship, followed by marriage, with Judy Bloggs. At the start of the relationship Joe owned nothing and Judy owned a house, household chattels and five horses. Joe and Judy live in Judy’s house which becomes the family home.
If Joe and Judy separate after they have been in a relationship for three years or longer, then as a starting point Joe would be entitled to half of the equity in Judy’s house, half of Judy’s chattels, including half the value of the horses, together with half the value of any other property acquired by them during the relationship.
However, if Judy enters into a Contracting Out Agreement, the agreement can provide for Judy to retain her house, her chattels, including the horses, her car, and her bank accounts as her own separate property at the end of the relationship.
There is a misunderstanding that owning property through a family trust will protect that property from being shared if a relationship ends. Property ownership through a family trust has some advantages in protecting property, but it is usually most effective if there is also a Contracting Out Agreement in place to protect the party’s beneficial interest in the Trust. This is especially the case when property is settled in a family trust after the marriage or the start of a de facto relationship, or if one of the parties is paying the Family Trust’s mortgage from income earned during the relationship.
No one plans for their relationship to break down and this is often outside of our control. What you can control however, by contracting out of the Act, is what happens to your property if your relationship does end.
Martin Bradley is a Partner in the Family Disputes Team at Norris Ward McKinnon. You can contact Martin at [email protected]
