How to Divide Joint Assets
Contracting Out Agreements
(commonly known as pre-nuptial agreements)
Being in national lockdown in response to COVID-19 is a difficult time for everyone. Many couples will find it puts pressure on their relationship.
If the relationship was under strain before the lockdown, this is likely to cause further stress and you may contemplate how your assets and liabilities will be split if you separate.
Regardless of how the lockdown affects your relationship, it is a good idea to consider a contracting out agreement. It will provide you with a binding contract for property division which may differ from how the Court would order your property to be divided.
What is a Contracting Out Agreement?
It is a written agreement that you and your partner make about how you want your property to be divided if you break up or die.
The law says that relationship property will be split equally between partners so, if you do not want this default division of assets, a contracting out agreement is a reliable way to arrange your affairs.
The Court cannot overturn a contracting out agreement unless the terms of the agreement are seriously unfair.
Who should enter into an agreement?
If you are in a marriage, civil union, or de facto relationship, the Property (Relationships) Act 1976 says that at the end of the relationship, property will generally be divided equally between the partners.
Sometimes, property you thought would be separate can be vulnerable to a claim by your partner, such as an investment property you acquired with an inheritance. Your partner may seek a greater share of relationship property if, for example, domestic labour was unequally divided during the relationship.
You can enter into a contracting out agreement any time: before, during, or after the relationship. Be aware though that both partners have to enter into the agreement, and this will be easier to agree on while the relationship is intact. We recommend that you make the agreement either before or in the early stages of the relationship.
What is a de facto relationship?
It is a relationship between two adults who live together as a couple. So far, so clear.
The grey area is what is meant by “as a couple”. This depends on the circumstances such as how long the relationship has been going; whether or not it is a sexual relationship; whether there are common finances or financial support; and even the public perception of the relationship.
What qualifies as relationship property?
Almost everything, except property that was owned by each partner well before the relationship. Sometimes even that can be vulnerable to a claim, for example, if it has been sustained by relationship property. If you or your partner owned property before the relationship was even contemplated, it is unlikely to be considered relationship property so it will not be divided between the partners if the relationship ends.
Relationship property includes:
- the family home (regardless of when it was bought);
- property that is jointly owned by the partners;
- property that is owned by either partner, if it was acquired immediately before the relationship, and if it was intended for both partners to use;
- property that was acquired after the relationship started and that was intended for both partners to use;
- life insurance policies;
- superannuation entitlements;
- any income derived from the property listed here.
How do we make an agreement?
Contact a lawyer in our family law team and we will send you a questionnaire and give you a cost estimate. We can complete the agreement via audio visual link. Please note your own partner will need to receive legal advice from a separate lawyer, independent of Saunders & Co.