What are the legal implications of a de facto relationship?

There is a lot to think about when deciding whether to live with a new partner. Is this the right time for us, whose home do we move into, how will the kids feel, and which furniture will we keep? One of the most important things to consider is the legal implications. If you decide to move in together, you are beginning a de facto relationship.

What is a de facto relationship?

A de facto relationship exists where two people aged 18 or older (and not married or in a civil union) are “living together as a couple”.

Knowing whether you are in a de facto relationship is not always black and white. It depends on all of the circumstances. For example, you might spend some nights a week together and some apart with your own children. The relationship could be “long distance” for work purposes. Factors that could indicate you have become de facto include:

• Duration of the relationship
• Nature/extent of common residence
• Whether there is a sexual relationship
• Degree of financial dependence/interdependence and any arrangements for financial support
• Ownership, use and acquisition of property e.g. purchasing assets together
• Mutual commitment to a shared life
• Care/support of children
• Performance of household duties
• Reputation and public aspects of the relationship

What happens after 3 years?

In New Zealand, you do not need to be married to trigger an entitlement to equal sharing, simply living together as partners. When you have been in a de facto relationship for longer than 3 years, there is a presumption that all relationship property will be divided equally if you separate. This is significant because relationship property includes but is not limited to the following:

• The family home (regardless of who purchased it, who contributed what to the purchase or whose name is on the title);
• Family chattels (objects such as furniture, appliances, cars etc);
• All property owned jointly;
• All wages and income acquired during the relationship;
• Any property used for your joint benefit; and
• Any property that is intermingled with relationship property.

(For more clarification as to what relationship property includes, see this article: What is Relationship Property & how is it divided).

What if we’ve been in a de facto relationship for less than 3 years?

If you separate prior to living together for three years, the rules are slightly different. This is called a de facto relationship of short duration.

If you separate after a relationship of less than three years, then relationship property claims don’t arise unless there is a child of the relationship or the claiming partner made a substantial contribution to the relationship, and if the Court considers there would be serious injustice without the division of relationship property. This is a high legal threshold to meet.

In this situation, the presumption of equal sharing won’t apply. Instead, relationship property is divided based on contributions to the relationship. Contributions can be both financial and non-financial (e.g. care of children and maintenance of the household).

How can I protect my assets?

Enter into a Contracting Out Agreement

A Contracting Out Agreement (more commonly known as a “pre-nup”) is a legally binding agreement that allows you to “opt out” of equal sharing upon separation or death. For example, if you own a house and your partner is moving in, a Contracting Out Agreement can say that your partner will not be entitled to a half share of your house once you have been together for 3 years.

You can enter into a Contracting Out Agreement at any time when you are contemplating moving in or already living together. If you have already been living together for 3 or more years this is still possible although can be a more difficult proposition as the presumption of equal sharing kicks in at 3 years.

A Contracting Out Agreement is generally the most effective way to protect assets and manage relationship property expectations before or during a de facto relationship.

Deciding not to move in together

If you are not ready to take this step, choosing not to live together can minimise the risk of equal sharing. However, this is not a risk-free decision. Within modern relationships, living together does not always look like sharing one residence. Lines can become blurred and one party to the relationship may believe a de facto relationship exists whereas the other party understood the relationship had not yet crossed that threshold.

Does a Trust protect my assets?

There is a common misconception that transferring assets into Trust can protect them from relationship property claims and avoid the need for a Contracting Out Agreement. This is not the case. There are many relationship property claims that can be made against assets in trusts, so this is not an effective way to protect your assets when entering into a de facto relationship.

If you would like to learn more about Contracting Out Agreements you can read this article here, or get in touch with our experienced Family Law team. We can offer you tailored legal advice for your situation to protect your property interests.