Protecting Assets in De Facto Relationships

Published on September 11th, 2020 and updated on September 22nd, 2021

Couples who decide to move in together and share their lives need to understand the potential legal implications of such a decision. The relationship could be classified as “de facto,” which could have financial consequences for both parties should they separate in the future.

Knowing if your partner has a right to apply for property settlement is essential, as it determines the legal protection of your assets.

How to Protect Property In a De facto Relationship?

One option is to familiarise yourself with the family law system. If you are aware of how property and financial settlements work, then it will minimise your risk as a couple because you can structure agreements for yourselves.

While you can use all kinds of financial arrangements, such as set up trusts, move money or hide it overseas, the reality is that property – including assets like cash savings accounts and investments- is included in a property settlement. The fact is that all property must be included in a property settlement. Courts can investigate if you are hiding assets from your partner before, during, and after separation, creating unforeseen financial risks.

Can I Protect The Family Home in a De facto Relationship?

If you are asking yourself, am I in a de facto relationship and what legal protections do I have? Please read the information below that answers many questions you may have about de facto relationships and family law.

Section 4AA(1) of the Family Law Act 1975 (Cth) defines ‘de facto relationship’ as:

A person is in a de facto relationship with another person if:

• The persons are not legally married to each other; and
• The persons are not related by family; and
• Having regard to all circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

In the full court case of Jonah v White (2012) FLC 93-522 it was held that the key in determining whether a de facto relationship exists is a finding of whether parties are a “couple living together in a genuine domestic basis.” In making such a determination there are a number of circumstances the court considers, which are set out in section 4AA(2) of the Act.

What Your Partner Is Entitled to In a De facto relationship?

If you are in a de facto relationship, a partner may be entitled to an equal share of the contributions made by you and your partner before or during a de facto relationship. You should seek legal advice about what that means for both parties going forward, especially if one person has greater earning power than they would otherwise have had without their significant other’s support!

In certain circumstances, a family lawyer might be able to advise you on the range of property items that are available for distribution should your matter go to litigation. Once they understand your situation, it can help when negotiating to reach your desired outcome more efficiently.

For a court to make an order about de facto relationship property matters, the relationship period must have been at least two years. However, if there are children or substantial contributions were made during this short time frame, this rule can be challenged.

How Do You Know if Your De Facto Relationship Has Come to an End?

Just as the circumstances leading to a relationship’s rise will vary from case to case, so do the circumstances of the end of the de facto relationship.

The recent case of Fairbairn & Redecki [2020] FCCA 1556 (15 June 2020) provides an interesting illustration of the court’s considerations in determining if a de facto relationship has broken down.

In Fairbairn & Redecki, it was agreed that Ms Fairbairn and Mr Radecki had entered into a de facto relationship in 2005 or 2006. Both parties were in their fifties and were living in a property owned by Ms Fairbairn. Throughout the relationship, the parties had always kept their assets separate, formalising two separate agreements to that effect (in 2020 and 2015).

By 2015, Ms Fairbairn had begun to decline cognitively and was later diagnosed with a progressive form of dementia, eventually being placed in an aged care facility. As Ms Fairbairn continued to decline, the ongoing management of her financial affairs became the focus of great conflict, ultimately leading to the NSW Trustee & Guardian (TAG) being appointed to act as her financial manager.

TAG sought to sell Ms Fairbairn’s home (which the parties lived in) so that she could pay a refundable accommodation deposit for the aged care facility she was living in. The sale was opposed by Mr Redecki. TAG contended that there had been a breakdown of the de facto relationship between the parties, issuing proceedings in the Federal Circuit Court seeking orders for a sale of the property that was the source of the dispute. Mr Redecki contended that the parties’ relationship remained intact.

At paragraph 153 of the judgement, His Honour Judge Betts noted that one of the core elements of the parties’ relationship was that, throughout their relationship, they agreed to keep their assets strictly separate.

In an attempt to stop the sale of the property, Mr Redecki continued to frustrate the lawful administration of Ms Fairbairn’s estate, which was to her detriment. Mr Redecki also made a number of proposals that resulted in the intermingling of assets, such as:

• That he pay the fees for Ms Fairbairn’s care and be reimbursed from her estate.
• That Ms Fairbairn’s superannuation is used to meet her care costs in the first instance, following which he would start contributing.

Ultimately, His Honour was of the view that Mr Redecki’s conduct (discussed in detail in paragraphs 154-160 of the judgement) was “incompatible with the ongoing existence of the de facto relationship.”

Protect Your Assets With a Binding Financial Agreement

The law surrounding de facto relationships is not ‘black and white’. If you are unsure as to the current status of your relationship and are concerned about asset protection, you should seek specialised advice from a lawyer specialising in family law.

With decades of combined experience, our legal team has ample knowledge on all aspects of property division, including maintenance issues, child custody arrangements and spousal support agreements.

If you need advice regarding separation in a de facto relationship, our team of lawyers are ready to help. Our Sage Family Lawyers can provide the guidance and support you need during this difficult time. We’ve seen families through separations before, so we know how hard it is for everyone involved. Please contact a friendly Sage Family Lawyers team member on 03 9070 9839 or info@sagefamilylawyers.com.au.

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