As your romantic involvement with a partner starts to show signs of commitment, you may be wondering how can I protect my assets in a de facto relationship?
Even when a couple isn’t married, they may be considered a de facto relationship. De facto relationships carry many of the same financial and property entitlements as married couples.
Initial Contributions in a De Facto Relationship
For many couples, an equal financial contribution is made by both people while they are together. They share household expenses such as rent, bills, and entertainment costs. And they each bring some assets into the relationship, such as furniture for the home.
If things don’t work out, a simple property split is usually achieved with little argument. Items go to the person who brought them into the relationship. Or joint purchases get divided up, with cash exchanged to even things up.
If the property pool is large, or there are disagreements that can’t get resolved, the help of a lawyer or mediator may be necessary to finalise matters.
Things get more complicated when initial contributions to the de facto property pool are not equal. For example, one person may already own a home with a large amount of equity in it. Or, one person may own a share of a business that has value as an income-producing asset. Another common scenario is that you have an elderly relative that has left you a large inheritance and may pass away soon.
These concerns might not be an immediate issue at the beginning of a relationship when you are just dating. But as things progress, you should consider what will happen if the relationship breaks up.
How Can You Protect Your Assets?
If your intention is that those assets get protected from any property claim by a de facto partner, then there are options for achieving that outcome.
One option is a binding financial agreement (BFA). A BFA is a legal contract between two people in a relationship. A binding financial agreement sets out how a couple’s property and assets get divided if the relationship ends. The agreement can deal with the entire property pool, or it can deal only with specific assets that you want to be handled in a particular way. You can enter into a BFA at any stage of the relationship. De facto couples sometimes refer to them as separation agreements.
Because the BFA is a legally binding agreement, it must be carefully written in very clear legal language. Even if you have an agreement between the two of you in principle, it’s not simply a matter of asking a lawyer to write it up for you. Both you and your partner will need separate, independent legal advice before signing the document. The agreement may be set aside by the Court if there are issues such as:
- Evidence of one party being coerced into signing
- Legal advice not being adequate or independent
- Deceptive behaviour by one party, such as not accurately disclosing information
- Failure to comply with legislation
You do not want to find out many years later that your agreement is not binding for one of those reasons.
Should You Get a Binding Financial Agreement?
Although a binding financial agreement is one way to protect your assets in a de facto relationship, it isn’t the only one. For example, it may be more suitable to protect certain assets in a family trust.
Furthermore, the absence of a BFA doesn’t mean a person will lose their assets in a property settlement. The Court does still consider initial contributions when looking at an application for consent orders for property matters.
If you are considering a relationship and want to know how to protect your assets, speak to one of our family lawyers to get the best advice for your circumstances.