Designed by
D'Vine Design Websites

In February 2002 the law governing how property is divided if a couple separates was completely overhauled. The Property (Relationships) Act introduced one set of rules for both married couples and those living in de facto relationships, whether heterosexual or same-sex. The new law creates a significant exception to the general rule of equal sharing of relationship property when couples separate. The courts now have the discretionary power to award one partner a greater than equal share, based on the economic implications of who did what in the household. The Act also applies if a couple are separated by death, rather than by the choice of one or both partners. Here are some things you need to know:

Does the Act apply to me?

Yes, the Act will apply to you if you are:

• Married, or
• In a de facto relationship of more than 3 years.

In special circumstances, the Act provides for a contribution-based division of relationship property when:

• Your marriage lasts less than 3 years, or
• Your de facto relationship lasts less than 3 years but you have a child or children of the relationship.

What is a “de facto relationship”?

According to section 2D of the Act, a ‘de facto relationship’ is a relationship between any 2 persons, both of whom are over the age of 18 years and not married to each other and who - “live together as a couple”. Where there is a dispute, the fact of whether a couple are, or are not, ‘living together’ is something that a judge must decide. The Act does not define this term but requires the court to consider ‘all the circumstances of the relationship’, including, among other things:

• “The nature and extent of common residence”
• “The degree of mutual commitment to a shared life”
• “Whether or not a sexual relationship exists”
• “The reputation and public aspects of the relationship”

How can I keep my property separate?

If you do not want the new law to define how property is shared in your relationship, you are free to “contract out” of the Act and, in effect, write your own script. To do this, both parties must enter a formal agreement pursuant to section 21 of the Act (‘a Section 21 Agreement’). Often couples enter a Section 21 Agreement in order to classify certain items as “separate property” that the Act would otherwise define as “relationship property” and potentially subject to equal sharing. To do this properly a thorough working knowledge of the law is essential. Consequently, the Act requires each party to obtain independent legal advice before signing. In fact, for an Agreement to be valid and enforceable, the lawyer acting for each partner or spouse must certify that he or she has explained to you “the effect and implications” of the document.

What happens to my property when I die?

Before you go any further, if you don’t have a will or your existing will does not reflect your current wishes, it is time to do something about it. Your indecision could adversely affect the ones you love. However, if you die without a will, your spouse or partner will still receive their share of relationship property under the Act. Your separate property would then be distributed in accordance with the rules of intestacy.

If you die with a will, your partner can choose between one of two options – either:

1. Inheriting under the will, or
2. Receiving their entitlement under the Act.

Because the Act gives the right to elect one of these two options to the surviving partner/ spouse, some important implications follow, particularly with respect to children. It is the decision of the partner/spouse as to which option benefits him or her the most. As a result, there may be less to go round for any children of the relationship and the situation for children of an earlier relationship would be even more precarious.

For example, if under his or her will, one spouse or partner left the spouse or partner of a second or subsequent relationship, a life interest only in a home of which with title was held solely in the deceased’s name, the surviving partner could choose not to accept such an interest under the will, if the home would be defined as relationship property under the Act. If the couple had failed to record the home as the deceased’s separate property in a section 21 Agreement, during the relationship, the surviving partner could be entitled to a full one half share of all relationship property, including the home, irrespective of whether there was a clear intention to provide for the children of an earlier marriage. Consequently, on the death of their mum or dad, the children of that earlier relationship could lose a large share of their inheritance to the new partner because of their parent’s failure to take adequate estate planning advice and neglect to take proper steps to contract out of the Act.

When should I contract out?

Section 21 Agreements can be formed at any time during a relationship, however, there are particular times when couples often decide to contract out of the Act. These include when:

• A couple commence living together
• They purchase their own home
• A spouse or partner acquires assets of their own (e.g. under a will)
• They decide to separate

If your partner decides to end the relationship or, if he or she unexpectedly dies, it is too late, at that stage, to protect the property you had always meant to keep separate. Any Agreement prepared between separating parties is unlikely to divide relationship property on terms other than those set down by Parliament. Therefore, if you want your own arrangement, you will need to face that as a couple now.

How do I get started?

The first step is to note down a list of the property that you wish to keep separate. This will make a start for your lawyer to prepare your own Agreement. You are going to need the services of a lawyer with the necessary expertise and the sensitivity to deal with both the property and relational issues. To contact us, please click here, fill out the form below, or call us toll free on 0800 LAW NOW (0800 529 669) to arrange a confidential consultation. If appropriate, it may be possible to meet with you in the comfort of your own home.