Protecting Your Relationship Property with a Contracting Out Agreement
The Act includes a presumption of equal sharing of relationship property, including on the death of one party to the relationship (even where that party’s will provides otherwise).
A Contracting Out Agreement can be used to:
- Define what constitutes relationship property of the parties and what property is separate property of each party;
- Govern how relationship property is to be divided upon the relationship ending, both due to the death of one of the parties and in the case of a relationship breakdown;
- Specify any particular agreement the parties’ have as to the use and occupation of their family home; and
- Set out the parties’ intentions as to how trust-owned property should be applied by the trustees of the relevant trust upon the relationship ending (although these clauses will be non-binding because the trustees retain the discretions they have as trustees).
For a Contracting Out Agreement to be validly entered into, each party must obtain independent legal advice regarding their relationship property entitlements under the Act, the effect of entering into the Agreement, and whether the Agreement is fair and reasonable. Each party’s signature on the Agreement must be witnessed by their lawyer.
We recommend that couples review their Contracting Out Agreements every five years or as their circumstances change, including the birth or adoption of a child or following a material change in their assets.
Our Trust Law & Wealth Protection Team are here to help you establish a Contracting Out Agreement.