You’re entering into a new relationship, how do you protect your property, including animals, from your de facto partner or spouse?
If your 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 have 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 the property owned by you and your partner, in order to advise you about the implications of signing the Agreement, and must be in a position to advise you about 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 your individual needs. The following example illustrates this point:
Joe Bloggs has been in a de facto relationship, followed by marriage, with Joanne Bloggs. At the start of the relationship Joe owned nothing and Joanne owned a house, household chattels and 5 horses. Joe and Joanne live in Joanne’s house which becomes the family home.If Joe and Joanne 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 Joanne’s house, half of Joanne’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 Joanne had entered into a Contracting Out Agreement then that agreement could have provided for Joanne to retain her house, her chattels, including the horses, her car, and her bank accounts as her separate property at the end of the relationship.
There is the misunderstanding that owning property through a family trust will protect that property from being shared if a relationship ends. Ownership of a property through a family trust has some advantages in protecting property from being shared at the end of a relationship but 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 something that people often have no control over. What you can control, by contracting out of the Act, is what happens to your property if your relationship ends.
Jo Naidoo is a Solicitor in the Family Disputes team at Norris Ward McKinnon. You can contact Jo at [email protected]
The Norris Ward McKinnon Equine Team endeavors to write articles that are beneficial to you whatever your involvement with equine. This issue discusses how written agreements can benefit all parties when buying, selling or leasing horses. The Norris Ward McKinnon Equine Team invites you to submit topics about equine matters you would like more information on so that we may write pieces useful to you. Please email topics or questions to Alice Nunn.