Prenuptial and Cohabitation Agreements

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When it comes to separation and finalising division of property, family law is not always about fixing a situation after it’s already happened.
Did you know that there are proactive steps you can take at the commencement of a relationship or marriage that will effectively quarantine your assets and those of your partner, allowing for an agreement with regard to the division of those assets should the relationship break down.

These agreements, known as binding cohabitation agreements, allow the parties to a relationship to give consideration to their individual financial circumstances and those of their partner when looking at either moving in together or getting married.

What is a Cohabitation Agreement?

A cohabitation agreement is a legal contract between two people who live together or intend to live together, in a committed relationship.
Under the Family Law Act (1975) this document is a type of Binding Financial Agreement (BFA) in which the agreement sets out each person’s rights and obligations while they are living together and what will happen to their property in the event they separate.
There are many different names for cohabitation agreements, including co-habitation contracts and co-habitation settlements and the most common being prenuptial agreements. This type of BFA is signed before marriage and specifies what will happen to the partners’ assets, property, and obligations in the case of a divorce.

What does a Cohabitation Agreement cover?

A cohabitation agreement can deal with a number of different issues, including:

  • How you will share your finances during the relationship;
  • What will happen to your property if you separate;
  • Spousal maintenance;
  • Any debts you may have;
  • And, what will happen to any children you have together, including child support and custody arrangements.

Why do we need a Cohabitation Agreement?

There are many reasons why cohabiting couples may choose to formalise their relationship with a cohabitation agreement. Some couples may feel it is important to protect their assets, particularly if one partner is bringing more wealth and assets into the relationship than the other.

Others may have children from a previous relationship and want to ensure that their wealth goes to their children in the event of their death, rather than their current partner. Cohabitation agreements set clear expectations and boundaries for all parties involved in what’s to come in terms of the division of property and other assets in the event of a relationship breakdown.

Couples who cohabit are not automatically considered to be in a de facto relationship and, as such, do not have the same legal rights and responsibilities as married couples or de facto couples. This means that if you cohabit and then separate, there is no automatic right to property division, spousal maintenance, or superannuation splitting, as there is for married and de facto couples.

Things to consider before you get into Cohabitation Agreement

When thinking about a prenuptial or cohabitation agreement some things you may wish to give thought to are:

  • Do you wish to protect the assets that you hold at the commencement of the relationship from a claim by your partner?
  • How do you intend to deal with assets that are accumulated during your relationship and jointly owned?
  • How do you deal with joint funds being paid to meet a mortgage during your relationship, even if one party owns the property?
  • Do you need to, or want to make a provision for spousal maintenance?
  • Do you intend to keep your finances separate during your relationship?
  • Do you want the agreement to last for the entire relationship or only for a certain period of time?
  • Will you need to review the agreement on occasion in the event of certain events?
  • How are you going to divide the property if you separate eventually?

Talking to your partner

While some people think that such an agreement has no place in a relationship built on love, trust and respect, others, and particularly those that have gone through previous relationship breakdowns, feel that it spares both parties from the stress and acrimony of possible future property proceedings.

If you are going to consider such an agreement, first of all you have to have a very frank conversation with your partner. An open discussion on all of the financial circumstances of both parties is required and you may need the assistance of an independent legal advisor or even a mediator to resolve any fine points of the agreement.

Once you have reached agreement you should have a solicitor draft the document which must contain a complete statement of all of the parties’ assets, liabilities, financial resources, income and expenditure, plus a declaration from each parties legal advisor that they have received independent legal advice.

It is important to note that if full and frank disclosure is not made by each party the agreement could be set aside based on incorrect information which misleads the other party.

Are Courts always willing to uphold binding financial agreements?

A reason a Court could set aside a binding pre-nuptial or cohabitation agreement may be that by putting the agreement into effect it will give rise to a substantial injustice to one party. Or in the event that there is children involved, that the party with the caring capacity for the children would suffer hardship if the agreement is not set aside.

Contact Experienced Family Lawyers

If you wish to discuss pre-nuptial or binding cohabitation agreements in more detail please contact one of our solicitors. The cost of these agreements will vary depending on each party’s individual circumstances and the complexity of each party’s financial circumstances.

FAQs

There are many benefits to having a cohabitation agreement, including:

  • Protecting your assets – If you own property, have savings or other valuable assets, a cohabitation agreement can protect your interests in the event that you split up.
  • Clarifying your financial arrangements – A cohabitation agreement can help to avoid arguments about money by setting out how you will manage your finances during your relationship.
  • Stabilising your relationship – Some couples find that making a cohabitation agreement can actually help to stabilise their relationship, as it forces them to discuss and agree on important issues upfront.

A cohabitation agreement can cover any number of issues, but most commonly includes provisions on:

Property and assets – Who owns what, and what will happen to property and assets if you split up.

Finances – How you will manage your finances during the relationship, including any joint accounts or credit cards.

Children – If you have children from a previous relationship, a cohabitation agreement can provide clarity on their financial support and living arrangements.

Pets – Yes, really! If you have pets, a cohabitation agreement can set out who will be responsible for them if you split up.

A cohabitation agreement is very similar to a prenuptial agreement, in that it sets out the financial arrangements between you and your partner in the event of a relationship breakdown.
The main difference is that a cohabitation agreement can be entered into at any time during your relationship, whereas a prenuptial agreement must be made before you get married.

A cohabitation agreement is suitable for any cohabiting couple, whether you are in a heterosexual or same-sex relationship and whether you plan to marry or not.
If you do eventually decide to marry, you can simply convert your cohabitation agreement into a prenuptial agreement.

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