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Under the provisions of the Property Law Amendment Act 1999, couples living together in a Defacto relationship are now able to enter into binding agreements which deal with the division of property interests upon the breakdown of their Defacto relationship.

These binding agreements are referred to as "Cohabitation Agreements" and "Separation Agreements".

A Cohabitation Agreement is an agreement made by Defacto spouses either in contemplation of starting a Defacto relationship or made during their Defacto relationship, which deals with all or some of the Defacto spouses financial matters.

A Separation Agreement is an agreement made by Defacto spouses in contemplation of ending their Defacto relationship or after their Defacto relationship has ended and deals with all or some of the Defacto spouses financial matters.

"Financial matters" are matters about the property or financial resources of either or both of the Defacto spouses.

Why You Should Consider Entering into an Agreement

The primary role of Cohabitation Agreements is to act as an insurance policy, covering you in the event of your relationship breaking down.

Just as people have house, content, income protection, trauma insurance etc to protect themselves against unforeseen future happenings, so they should consider taking steps to provide themselves with certainty, security and protection in the event of their relationship breaking down.

We insure our house against it being destroyed by fire, even though we are not expecting this to happen. Similarly, couples should take the same approach with insuring against the breakdown of their relationship.

While most Defacto couples feel they don't need this type of protection, it should be acknowledged that statistically, at least two (2) out of every five (5) Defacto relationships will end in separation. All couples hope that their relationship won't fail however, we all need to accept that life has risks and that it is more likely that your relationship will fail and you will rely on your Cohabitation Agreement, than it is, that you will have to call on many other types of insurance.

The Advantages of having a Cohabitation Agreement

The advantages to you of entering into such an agreement are:

To provide certainty;

To protect ownership of assets brought into a relationship;

To protect ownership of special assets acquired during a relationship (for example, an inheritance);

To protect ownership and retention of business interests;

To prevent costly, stressful and lengthy litigation if the relationship does breakdown;

To provide peace of mind to couples in relation to financial matters in the event of their relationship breakdown;

Because they will be binding on the estate in the event of death;

Do it for yourselves and your children.

Who will benefit the most from such Agreements

The people who would potentially benefit most from such an agreement are:

People entering into their second or subsequent relationship, to avoid the stress and costs associated with the potential breakdown of their subsequent relationship and to provide for pre-existing children;

Couples employing asset protection. For example, where a couple puts all personal assets in the Defacto Wife's name, an agreement can be filed acknowledging the Defacto Husband's financial interest regardless of whose name the property is in;

People with substantial assets who are already in a relationship and who need to protect their interests and require certainty;

People who have substantial assets and who are about to enter into a relationship;

Couples who operate a family business;

People who have substantial or important business interests with other parties. For example, Company Director, Equity Partners;

Every woman should have one.

Whatís Involved in Establishing an Agreement

The advantage of a Cohabitation or Separation Agreement is that if properly drafted then the Court is prevented from making a property adjustment Order inconsistent with the agreement's provisions on financial matters (with some exceptions as detailed below).

In Order for the Cohabitation or Separation Agreement to be binding, it must be a "Recognised Agreement" under the Act. A Recognised Agreement is a Cohabitation or Separation Agreement of the Defacto spouses that:

Is a written agreement; and

Is signed by the Defacto spouses and witnessed by a Justice of the Peace (Qualified) or Solicitor; and

Contains a statement of all significant property, financial resources and liabilities of each Defacto spouse when the Defacto spouses sign the agreement.

The Court is only allowed to ignore or vary a Recognised Agreement if the Defacto spouses have in writing or by their conduct revoked the provision or consented to the revocation of provisions of the agreement. Also, the Court may vary all or any of the provisions of the agreement if the Court is satisfied that enforcement of the agreement would result in a serious injustice for a party to the agreement or a child of either of the Defacto spouses or because of circumstances arising since the agreement was made is impracticable for the agreement or part of the agreement to be carried out.

It is therefore now permissible in Queensland for parties to enter into binding agreements dealing with the future division of their property and resources in the event of the breakdown of their Defacto relationship.

It is recommended that parties contemplating entering into such agreements seek legal advice so that the agreements are properly drafted as "Recognised Agreements" and regularly updated so as to afford maximum protection under the legislation.

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