During the excitement and euphoria of a new relationship, the allusion of your partner taking half your property is likely to be a conversation you want to avoid.

Regardless of how honest and trusting you or your partner are, it is wise to protect yourselves against potential risk should the relationship not work out. The Property (Relationships) Act aims to protect individuals in relationships when they divorce or separate, but choosing to ‘opt out’ could offer you more protection.

Property (Relationships) Act 1976

Once a relationship has entered into a marriage, civil union, or has exceeded three years (de facto), all relationship property becomes of equal ownership under the Act. Relationship property are the assets that you have gained during the relationship. These can include items such as houses, cars, money, furniture and businesses. Assets gained prior to the relationship is considered separate property but may still be under dispute if the partner has contributed financially or non-financially during the relationship. Non-financial contribution could include looking after the children enabling the other partner to work in their ‘separate’ business.

Separation

If you have separated from your marriage, civil union or de facto relationship, relationship property is to be divided equally. For many couples, after a long relationship of equal contribution, they will be happy to split their relationship property equally. Complications may arise when one person brings substantially more to the relationship and could face a detrimental loss should they lose half of their assets.

Mediation and Negotiation

If both parties are unable to reach an agreement over the divide of their assets, they will need to seek the help of their lawyers to settle through negotiation. This can be a lengthy process until both parties are happy. You may want to seek a mediation service by which an impartial third party will allow you to identify the issues to reach an agreement without bias or persuasion. Mediation is common in disputes where children are involved.

Family Court

If an agreement could not be settled with the help of lawyers, the matter can be taken to the Family Court. There will be numerous stages to help the parties come to a decision themselves. Should an agreement not be decided on, the case will eventuate to a defended hearing in which a Judge will decide. Settling through the Family Court is an expensive and time consuming process.

‘Contracting Out’ of the Act

Discussing a contracting out agreement can be a difficult topic to address, but it is a mature and important conversation that will help decide what will happen to your assets as the result of a split or death.

Partners can ‘opt out’ of the act by entering their own legal agreement which will outline how the relationship property will be divided. The agreement is a legal document so a process will need to be followed including both partners seeking individual legal advice. The document must be signed by both parties with a lawyer present. The agreement may be drawn up at any point during the relationship but is usually done before entering a marriage or civil union.

A ‘Contracting Out’ Agreement is a good way to have both partners interest taken care of as well as protecting the individual who could potentially face huge losses should their property be split 50/50.

The agreement can and should be updated with any significant changes such as the addition of children or a new property.

Protecting Property in Trusts

Trusts are often set up to protect property held within a family or business assets. In the event of a separation or divorce, it should not be assumed that all assets in a trust are protected by the trust alone. If a partner has been contributing to an asset in a trust, it may not be considered separate property and no longer afforded the protections of a trust. Even with trusts in place, it is highly advisable to come to an agreement by ‘Contracting Out’.

What Happens in the Event of Death?

The surviving spouse can choose to claim half of the relationship property under the Property (Relationships) Act or accept what has been left to them in their partners will. If a claim is lodged under the Act, it will need to be treated as a legal document, signed and witnessed by your lawyer. Once a claim has been made, you lose the right to inherit under the will, even if your claim was unsuccessful.

Discussing these topics may be uncomfortable for both partners in a relationship, but should not be ignored. Talk to your lawyer for advice on the approach and protection of your assets.