Lawyer George Ireland advises on the importance of making a will and considering the implications of The Property (Relationships) Act.
Nothing can kill that romantic moment with your beloved quite like bringing up the subject of a prenup, however, many of us would be better served by giving some thought at the beginning of a serious relationship to what we want to happen to our property should that relationship end by separation or death rather than having the law impose something on us that we may not want.
The Property (Relationships) Act 1976 governs the division of property when a relationship ends either by separation or death. As well as married partners, the Act applies to de facto relationships, including same-sex couples, those in civil unions, and those in polyamorous relationships.
The Act creates an opt-out system, i.e., if the parties to a relationship do not enter into an agreement opting out of the Act, then the Act will apply. There are strict requirements in the Act for such agreements to be valid, e.g., they need to be in writing, and both parties need to have their own lawyers, who must certify that they have given their clients independent legal advice as to the agreement and explained the effect and implications of the agreement to their clients before it was signed.
The Act will apply after you and your partner have lived together in a relationship for more than 3 years. The Act classifies property owned by the parties as either relationship property (generally shared equally) or separate property (not shared). Relationship property is usually the main residence and chattels and any other property acquired by the parties during the relationship other than by inheritance (which is protected as separate property). Separate property, with some exceptions, is basically everything else.
What about Trusts?
Many people have set up trusts thinking that property in the trust is automatically protected from a claim by any partner. This is not necessarily the case. The Act contains provisions that, in certain circumstances, can be used to “claw back” assets that have been transferred to the trust or to award compensation to a partner who has been disadvantaged. If assets in a trust are to be protected as separate property, then a contracting-out agreement should also be entered into.
Death
Hopefully, you and your beloved have made wills that look after each other in the event of death. The Act gives the survivor the option of either taking the property provided for them by the will or electing to make a claim under the Act for the division of relationship property. This would also be the case if no will is found. Everyone should have a will.
The Property (Relationships) Act is progressive legislation that addresses many injustices that have occurred in the past. However, it is a one-size-fits-all piece of legislation that will not be a good fit for many relationships. It is important to carefully consider very early on in a serious relationship whether you and your partner want the Act to apply to your relationship. If not, see a lawyer about contracting out of the Act, and make a will!
George Ireland is a partner in McVeagh Fleming Solicitors. He specialises in disputes relating to relationships and trust property, has over 40 years of experience, and is passionate about achieving the best results for his clients.
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