Contracting out agreements – who needs them and why?

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October 15, 2019
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A contracting out agreement (aka pre-nup), is an agreement which enables a couple, whether married or in a de facto relationship, to contract out of the Property (Relationships) Act 1976 (“The Act”). The Act sets out the law on how property should be divided in the event of separation or death, and in a general sense (there are exceptions) provides for equal division of all relationship property after a couple has been in a relationship for three years.

Relationship property under the Act includes:

  • The family home (whenever purchased);
  • Family chattels (whenever purchased);
  • All property owned jointly;
  • All property owned by either spouse immediately before the marriage/relationship if the property was acquired in contemplation of the relationship and intended for common use and benefit;
  • All property purchased after the relationship began- exceptions apply.
  • Property acquired for common use and benefit after the relationship began from property owned prior to the relationship- exceptions apply;
  • The proportion of the value of any life insurance policy that is attributable to the relationship;
  • The proportion of the value of any superannuation scheme entitlements attributable to the relationship; and

Who needs a contracting out agreement?

If you have established a property and/or investment portfolio, no matter how big or small, while single; or have come out of a previous relationship with a settlement; or you’ve saved a good amount of money while single and are purchasing a property with a new partner, then in order to protect what you are bringing in, you should be seriously considering a contracting out agreement with any new relationship that has or is about to move to the next important phase of living together.

Why do you need an agreement?

Well, some of your property may immediately become relationship property (simply by the nature and or use of the property) and that may not be what you want to happen. Even if your property was classified as separate property under the Act, if your partner makes any contribution, whether financial or otherwise, they would have a claim on any increase in value. Therefore, it is wise to consider whether an agreement is appropriate for you.

What else do you need to know?

In order to formally contract out of the Act, the agreement you sign must satisfy certain requirements. Both parties must have obtained independent legal advice prior to signing, and their independent lawyers must witness and certify the agreement.  You and your partner will each need to have your own lawyer.

It’s never too late! Even if you have passed the three-year threshold, if you and your partner are in agreement regarding protecting certain property, we can still assist you. Please get in touch with our family lawyer, Rebecca Kroeze, if this article raises questions for you.


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