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If you are living in a de facto relationship, you may decide you need a Cohabitation Agreement. In Australia these agreements are correctly known as Binding Financial Agreements and all deal with what should happen to assets and liabilities if the relationship ends.
Whenever two people choose to live together, they can also elect to make an agreement that sets out how the couple will deal with living costs, property, other assets and liabilities and any related issues.
Here is what you need to know.
A Cohabitation Agreement (or Binding Financial Agreement) is a contract entered into between a couple who are living together but who are not married. It is the de facto version of a ‘prenup’, designed to deal with property and monetary issues in the event the parties separate.
If you are currently in a de facto relationship, you can use a Cohabitation Agreement.
In fact, you can enter into a Financial Agreement with your partner at any stage of your relationship, whether it be:-
• before you move in together (Pre-De facto Financial Agreement);
• while you are living together (Co-habitation Financial Agreement); or
• at any time after you separate (De facto Separation Financial Agreement).
Common reasons for entering into a de facto agreement are to:-
• ensure inheritances are safeguarded and passed onto the children;
• protect assets accumulated individually by parties before the relationship; and
• protect one party from the debt accumulated by the other.
You need to make your Cohabitation Agreement clear and easy to understand, which will avoid confusion and the possibility of misunderstandings.
Under the Family Law Act, there are certain formalities you need to comply with to ensure your Agreement is binding.
Firstly, your agreement must be in writing. You should consider all potentialities, including what you will do with any gifts, inheritances, living expenses, even the unfortunate event of the death of either party.
Remember, a Cohabitation Agreement is a plan for a future potentiality. It may never need to be used but is intended to serve as a safety net, preventing the potential for the parties to end up in court.
What should I include in the cohabitation agreement?
Cohabitation Financial Agreements are intended to deal with assets and liabilities in the event of a separation.
Both parties need to make full financial disclosure to each other in their agreement. This means listing any assets owned, such as cash, real estate, shares, as well as any liabilities or debts. The parties then set out who gets what in the event of a separation.
What about items we buy together?
Cohabitation Agreements may also deal with property acquired after the cohabitation begins or after you formalise the agreement. You may decide to keep jointly purchased property as joint property, to assign the property to one person or divide it in any other manner.
The point of Cohabitation Agreements is to make it clear to each person what the status of the property is. If a separation occurs, each person will know what belongs to them and what belongs to the other person, and how to divide what is left over.
Cohabitation Agreements have become more and more popular among many people.
You can draft a suitable de-facto relationship contract to cover almost any situation. Whether your property concerns are simple or extremely complicated, making sure both you and your partner understand what will happen if you ever split-up is a wise choice and keeps your interests secure.
Financial agreements before de facto relationship More Information. Financial agreements during de facto relationship More Information Financial agreements after breakdown of a de facto relationship More Information
