Future-proofing Your Relationship

Devon Miller, Gemma Manns

June 2018 . . . As the Chinese proverb “dig the well before you are thirsty” says, planning in life is key. There are many aspects of life that need to be planned for but, unfortunately, some of those things just aren’t that pleasant to think about.  Just as you might put a Will in place so that your estate is distributed according to your wishes when you die, you can put into place a Contracting Out Agreement that will ensure that your property is divided in an agreed manner if your relationship should break down. 


The Property (Relationships) Act 1976 deals with how the property of married couples, civil union partners and de facto couples is divided when a relationship ends.  The general presumption of the Act is that a couple’s property will be divided equally between them.  This will apply even in the following circumstances:


  1. Jack and Jill are married and purchased a family home together for $350,000. Jill contributed $60,000.  Jack contributed $15,000.  When they separated three years later, the family home is valued at $400,000 with a debt of $250,000. Jill will not receive any extra payment for her higher contribution to the house, even though she may well have considered that money her separate property.


  1. Jack lives on the family farm, which is owned by his family trust.  Jill comes to live on the farm with Jack.  Historically, having assets in a family trust was a way to ensure that those assets remained as separate property. However, recent developments to the law mean that if Jack and Jill separate after at least three years together, Jill may have a claim against some aspects of that family trust and the assets it holds.


  1. Jill had been raising her two children alone after the death of her first husband John.  When John died he left Jill the family home. Her new boyfriend Jack, moved in three years ago. When Jack moved in he had minimal assets and they have since intermingled their finances.  If they separate Jack will have a claim on one half of the relationship property, including the family home. Even if they are assets that Jill thought would go to her children when she passed away.


If you do not want the presumption of equal sharing to apply to your relationship property when you separate, you can put in place a contracting out agreement. This is sometimes call a “prenup”.  The best time to put a contracting out agreement in place is at the start of the relationship or before the relationship has lasted three years.  However, an agreement can be signed at any time in the relationship.  If you already have a contracting out agreement, it should be reviewed regularly to ensure it is still fair and reasonable.


A relationship breakdown is an emotional and stressful time.  If you don’t have a contracting out agreement in place, things that you believed were agreed upon during the relationship will become uncertain. 


Please contact the Private Client’s team if you have any questions about contracting out agreements, separations or relationship property.