Property Problems: Deal at start of relationship is best protection

By VIVIENNE BISHOP and ROD WILLIS

Q. I own my own business and have assets worth around $5 million, which include commercial investment properties. I have been divorced for some time and my children spend around three nights each week with me. My de facto partner and her young daughter moved into my home with me about 18 months ago. It is not owned by a trust and I have heard that a trust will protect it if my relationship should end.

I'm worried that if my new relationship suddenly ends my property will not be protected. How will this new relationship law affect me?

A. The act you refer to is the Property (Relationships) Act which applies almost identically to all couples in a relationship regardless of marriage and applies to your de facto relationship.

The act's most significant impact on de facto couples is on relationships that have lasted for three years or more. Couples in a short-term relationship can still qualify as long-term partners where there is a child of the relationship or one partner has substantially contributed to the relationship.

If you and your partner separate, either of you can apply to the court for division of your property.

As division of property is affected by the length of your relationship, de facto partners should be careful about determining when their relationship "started". You and your partner may have different views on this and it is critical to property division.

The home and chattels are considered relationship property whenever they are acquired, and without a contracting-out agreement these assets are the most vulnerable to a claim on separation. Commercial property which you own will also form part of the property pool and will be taken into account if a property division occurs.

If you settle your assets into a trust or company (including your investment properties) now that your relationship is afoot and you separate after three years or more, you may be deemed to have defeated your partner's interest in those assets and ordered to pay her compensation.

You can still dispose of your assets to a trust or a company (and we would recommend you do this to protect against creditors - particularly in relation to your home/personal assets) but you will need to enter in an agreement with your partner to protect against a claim by her if you separate.

Dispositions of assets to a trust or company before a relationship has started are generally considered separate property.

You also need to be aware that your income may become the subject of a claim. If the courts are satisfied that your income and standard of living are significantly higher than your partner's on separation, you may be ordered to pay a lump sum or transfer assets to her. This would arise where your partner can show she is worthy of compensation due to her contribution to your relationship, such as foregoing her career to support you and your children.

You and your partner can agree to contract out of the act by entering into a relationship property agreement. This determines which assets are relationship (shared) and which are to remain separate.

The agreement must be in writing and you must each seek separate and independent legal advice before signing. Contracting-out agreements can be overturned if they are considered seriously unjust, so ensure your solicitors have expertise in this area.

There are many variables to take into account when a relationship ends. Relationships of three years or longer ending by the death of one partner are also susceptible to claims and it is important that your will is up to date.

Even if you have protected your assets using trusts or companies, you can still be exposed to claims under the act by way of compensatory orders. Therefore we strongly recommend entering into a relationship property agreement when starting a new relationship.

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