Splitting assets after a break up: marriage v de facto

I spoke to someone recently who had been living with their partner for 3 years and commented that they weren’t married and had separate finances, so they didn’t have to worry about property if they separated.  This is a common misconception.

While there are still differences between a de facto relationship and a marriage in family law, we’ve come a long way and the differences are no longer significant.  This reflects society’s attitudes.  People in a de facto relationship contribute to the assets of the relationship, both financially and otherwise.  A person in a de facto relationship requires the same legal protection as a person in a marriage.

If you are intending to move in with your partner, you need to consider how you approach your financial relationship. 

If you have been in a de facto relationship for 2 years, or a de facto relationship resulting in the birth of a child, and you separate, you are entitled to apply for orders in relation to property.  There are exceptions to the 2 year requirement, such as if one person has contributed significantly and not making an order would amount to a serious injustice to the person.  An example of this is when a home has been purchased jointly and orders are required to transfer the property from both names into the sole name of the person who is to keep the property.

A home being in one person’s name does not mean the other is not entitled to an interest in the property.  One person may own a home when you start living together.  The other may contribute to the value of the home increasing during the relationship, for example, by helping with renovations, or by paying for weekly expenses to enable the other to make mortgage payments. Similarly, keeping separate bank accounts does not mean that you will retain what is in your own account. 

Contributions to the assets of a relationship are not only financial contributions, such as mortgage payments or payment for assets.  Other contributions are considered, for example, if one person maintains an asset, or performs the majority of childcare or household tasks, enabling the other person to focus on their career and earn income.

The considerations when deciding to live with someone are similar to the considerations when deciding to be married.  You may consider entering a Financial Agreement (known as a pre-nuptial agreement) to protect your assets in the event you break up.  Financial Agreements are complex and a failure to comply with every requirement of the relevant legislation can result in the agreement being invalid.  You may decide not to enter a Financial Agreement, as most people do.  Of course, this is a legitimate choice, particularly if you have similar assets when you start living together.  You just need to be aware that the law will apply in relation to dividing your assets after 2 years and often after a shorter period.