What should I know about de facto before moving in with my partner?

What should I know about de facto before moving in with my partner? | Beanstalk Mums

Deciding to move in with your significant other is a big step. A sign that you’re ready to commit to your partner and share your lives more intimately. In essence, you are agreeing to live as ‘man and wife’ without formally entering the institution of marriage. By moving in with your partner you are entering a de facto relationship or de facto marriage.

From a legal perspective, a de facto marriage is considered much the same as an actual marriage – especially when it comes to the division of property, caring for any children of the union and spousal maintenance.

THERE IS MUCH CONFUSION AROUND THE RIGHTS OF DE FACTO COUPLES, SO LET’S ADDRESS THE MAIN ONE NOW.

Many people believe that you automatically give up half of your assets to your partner once you’ve been living together for two years. This is incorrect. The Family Law Act (the Act) does not give any automatic right for one person to receive another person’s assets, even after two years of living together.

What the Act does do, is allow the parties who have been in a de facto relationship (for over two years), to make an application to the court for orders to be made about how your assets and liabilities should be divided following a breakup.

However, the Act does make some exceptions to the two-year minimum period, including where:

  • there is a child of the relationship;
  • the de-facto relationship has been registered; and
  • where one party has made substantial contributions to the other party.

In those circumstances, the parties can make an application to the court even if the relationship lasted for less than two years.

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SO HOW DO YOU PROTECT WHAT YOU ALREADY HAVE IN A DE FACTO RELATIONSHIP?

If you are concerned about the financial consequences of moving in with your partner, then you may want to consider a Cohabitation Agreement.  

In Australia, a cohabitation agreement is a type of financial agreement. A Financial agreement is the proper name given to an agreement between couples in a de facto relationship or contemplating a de facto relationship, or even after a de facto relationship (separation). Wherever we refer to a Cohabitation agreement, we are referring to Financial Agreement, they are the same thing.

Whilst the main effect of a financial agreement is to prevent either party making an application to the Family Court for the division of property, negotiating a financial agreement encourages a couple to agree on how to divide their property in the event of, or following, separation. Financial agreements may deal with all or any of the parties’ property and financial resources and also how maintenance would be paid.

In general, cohabitation agreements suit couples where one or both parties come into the relationship with existing money, debt or other assets. For example, a young couple who are both starting with very little may not think they need a cohabitation agreement.

Examples of relationships that could benefit from a cohabitation agreement include relationships where one or both parties:

  • Have children from a previous relationship and they want to ensure that their existing assets are preserved for their children;
  • Have accumulated a significant amount of assets before beginning the relationship;
  • Expect to receive a significant inheritance or gifts during the relationship;
  • Are involved in a family business and want to ensure that a relationship breakdown would not interfere with the business;
  • Wish to quarantine themselves from debt incurred by the other party – see our article on Sexually Transmitted Debt;
  • Are keen to avoid a court case to decide how their assets should be split in the future; and
  • Would like the security and certainty of understanding their future financial position if the relationship doesn’t continue for whatever reason.

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WHAT ARE THE BENEFITS OF A COHABITATION FINANCIAL AGREEMENT?

When you first consider a cohabitation agreement, your mind might instantly race to the negatives. Just when you’re in the throes of an exciting relationship and you’re either considering moving in together or you’re already living together, the last thing you want to do is sit down and have an awkward conversation about who gets what if you decide to break up. See how to talk to your partner about a Cohabitation Agreement

But think of it this way. When do you think two people would be in the best position to make life-changing decisions about the future: While feeling safe and secure in a happy relationship, or when tensions are high and emotions go haywire during a bitter breakup?

The fact is that, if the relationship breaks down in the future, decisions will have to be made at some stage about the asset pool of the relationship. You could make them now while both of you are in a good place and can deal reasonably and respectfully with each other, or you can wait until after you’ve split.

The best-case scenario, of course, is that your relationship goes from strength to strength and you never need to rely on a cohabitation agreement at all. In that case, at least you have had the peace of mind knowing you both would have been taken care of financially if you hadn’t been able to make it work.

Other benefits of a cohabitation agreement include:

  • Relationship benefits, knowing that you and your partner can calmly and reasonably discuss matters of great importance;
  • Peace of mind throughout the relationship, safe in the knowledge that you have had the all-important discussion about your finances and have come to a responsible decision;
  • A reduced risk of disagreements throughout the relationship, since money and lack of financial transparency are two of the most common causes of relationship problems;
  • The ability to avoid a lengthy and costly court case by relying on the provisions of your cohabitation agreement instead;
  • The freedom for you and your partner to make your own binding decisions about the future of your assets, rather than allowing a court to make decisions for you.

WHEN IS THE BEST TIME TO MAKE A FINANCIAL AGREEMENT?

A Financial agreement can be created at any point in a relationship, from before you start living together, after you’ve moved in together, or even after you’ve separated.

The best time to create a cohabitation agreement is as soon as possible after you decide to live together or start living together. The earlier you sit down and make decisions about the future of your finances should the relationship breakdown, the quicker you can finalise the matter and put the whole topic out of your mind, concentrating instead on enjoying your relationship together.

HOW MUCH DOES A COHABITATION AGREEMENT COST?

The cost of a cohabitation agreement depends on how you go about entering into the agreement.

If you decide to engage a lawyer to create and advise you on the agreement, both you and your partner will need to hire separate lawyers to represent each of you.  Based on estimates given by Australian law firms, an uncomplicated straightforward cohabitation agreement would cost each party between $3,000 and $5,000.  Any unusual or complex circumstances, such as either party being involved in a company or trust, or owning assets overseas, could easily see the cost increase substantially.

I know you are probably shocked at this point, but luckily, creating a cohabitation agreement doesn’t need to cost the earth. There is a better way.

When you order a cohabitation agreement kit from RP Emery for just $97, you get  everything you need to create a cohabitation agreement to suit your circumstances.  Your kit includes an easy-to-use agreement template and instruction manual, along with a variety of samples and examples, making it a simple and straightforward process to draft your own agreement.

It is important to understand that the Family Law Act requires that both parties receive independent legal advice before signing a cohabitation agreement.  This requirement ensures that agreements made are binding and enforceable in the Family Court.

When you order a cohabitation agreement kit from RP Emery, you will have access to a significantly reduced rate with a nationally licensed, independent lawyer who can provide you with the independent legal advice you need, at just a fraction of the normal cost.

THE PROCESS IS SIMPLE

Once you have purchased your kit and customised your cohabitation agreement, send your agreement back to RP Emery. They act as a conduit between yourself and the lawyers to ensure your agreement contains all the necessary provisions and that the lawyers will be able to work with your agreement for a low fixed fee.

From there, you and your partner’s details will be passed on to two independent, nationally recognised lawyers, who will contact each of you by phone and/or email as soon as possible.

There is no need for in-person meetings or a long, drawn-out process although if you prefer face to face that can be arranged.  Once you have spoken to your lawyer about the agreement and the lawyers are satisfied that you both understand the importance of the agreement you are entering into, you will each receive a letter of advice, certificate of legal independent advice, and a hard copy of your final agreement.

Then, it’s simply a matter of signing your agreement in front of a witness, filing it away, and then carrying on enjoying the relationship as usual.

What’s the next step regarding your de facto relationship

If your think that a Cohabitation or Financial Agreement will provide peace of mind for the financial side of your de facto relationship please get in touch with us on 1800 608 088 or visit our website today.

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Nadia MacLeod

Nadia MacLeod

Nadia MacLeod is a Director of RP Emery Legal Kits. We help separating couples document their property settlement peacefully and affordably, by using our convenient Financial Agreement Template Kits and Legal Review Service.

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