In a De Facto Relationship? What Happens to Your Assets if It Were to End?

The Duke in Shakespeare’s Measure for Measure famously remarked ‘What’s mine is yours, and what is yours is mine’. Perhaps not in law! Maybe you are currently living with a partner without the formality of a marriage certificate but does this necessarily mean that ‘what is yours is indeed yours’?

In this piece, we shall look at de facto relationships and, should the relationship end, what this might mean regarding spousal maintenance or property settlement claims particularly in the light of the findings in a recent (same sex) de facto relationship case: Chancellor & McCoy (2016).

Essentially any relationship which people consider themselves to be in, without being related to each other, could be considered de facto. It may not even be necessary to live together full time.

In Australia, de facto couples have most of the same rights as married couples which can also mean facing the same issues if the relationship comes to an end. This is particularly important because survey data shows that de facto relationships are more volatile than marriage. For many it can be a way to marriage but for those who never marry the probability of separation is more than six times greater. And the end of a de facto relationship can be every bit as fractious as a failed marriage. When it comes to a property settlement, even if all the assets are in one name, it does not mean the other partner cannot make a claim. At the same time it does not mean a 50:50 split either.

What does the law have to say about de facto relationships?

Reforms introduced in 2009 to the Family Law Act 1975 (Cth) mean that same sex and opposite sex de facto couples, when they end their relationship, could have their property and financial matters dealt with essentially in the same way as married couples. It means that those persons in de facto relationships have the same financial responsibilities to their partner as if they were in a married relationship.

Deciding if a de facto relationship exists is not necessarily straightforward. However, if a de facto relationship has been proven to the court’s satisfaction, in a dispute the court would then need to consider whether it is just and equitable to alter existing property interests. This is similar to married couples where property is held in sole names.

In Chancellor & McCoy (2016) Ms Chancellor (59) and Ms McCoy (55) had commenced their same sex relationship in 1982. Both were teachers and had acquired properties in their own name and also each had superannuation. The relationship ended in 2011 with Ms McCoy’s assets being valued at $1.7m and Ms Chancellor’s at $720000.

The Court decided that the parties had arranged their finances in a way that they could use their incomes as they wished without reference to the other party. Neither party had provided for the other in the event of the other partner dying and, at separation, neither party was aware of the other’s assets. Whether the separation of finances was deliberate or not was considered irrelevant because they had continued their relationship without intermingling their financial arrangements over a period of 27 years. It was not required to divide their property as it would not be just and equitable to do so.

What does it mean for the parties if the parties decide to separate? Are same sex de facto relationships different after all? What can the parties do to protect their respective assets?

While a de facto relationship is very like marriage, and the courts treat them in a similar way, the intention behind entering into such a relationship can vary considerably and this can affect the division of assets on separation.

Simply being in a recognised relationship, whether marital or de facto, and accumulating property together, does not give rise automatically to the right to a property adjustment order on separation. It may not be considered just and equitable.

The case Chancellor & McCoy, suggests that if there is an intention not to share assets should the relationship end, a de facto couple should be careful to keep their financial affairs completely separate.

However, it may not be sufficient to rely on this fact alone as in many cases other non-financial considerations such as parenting or home-making can be taken into account when deciding on an alteration to property interests between the parties. So even if a couple conduct themselves in a way similar to Ms Chancellor and Ms McCoy there is no certainty that the court will not make a property adjustment order. Courts will judge each case on its own particular facts and every situation is different.

In the case of same sex de facto relations, are these different after all given a lesbian was denied a share of her former partner’s assets despite such a lengthy relationship? In her appeal Ms Chancellor argued her relationship had been held to a ‘higher or different standard’. The Court, however, relied on the decision in Stanford v Stanford 2012 which found splitting assets is not necessarily automatic. The judge concluded it would not be just and equitable to make an order changing the property interest given the way they had conducted their finances.

To avoid uncertainty and provide financial security couples should consider a Binding Financial Agreement setting out the distribution of assets in the event of the relationship ending so as to avoid the test of whether a property adjustment order need be made. This can be done at any time during the relationship and is similar to a pre-nuptial agreement.

Contact Us Szabo & Associates Solicitors

Szabo & Associates, Solicitors, are specialists in family law matters. If in doubt about the potential impact your relationship might have on your financial situation then please get in touch. Each case is unique and specialist advice is advisable. Contact us now on (02) 9281-5088 or fill in our online contact form.