De facto relationships: What are the potential legal implications?
The makeup of the modern family today differs from the Australia of previous generations. As a result the definition of spousal relationships have also changed in the eyes of the law.
De facto couples are now entitled to the same rights as married couples in Family Law matters including property, financial settlements, maintenance and arrangements for children of the relationship.
Many people have raised concerns about their relationship status and whether they are in a de facto relationship. Each situation can be very different.
What is a de facto relationship?
A de facto relationship usually refers to the arrangement when two (2) people live together as a couple (including same-sex couples) on a genuine domestic basis; the couple is not legally married.
In order for a Court in New South Wales to determine whether a couple is in a de facto relationship there would need to be consideration of the following criteria:
- The duration of the relationship;
- Whether the couple is in a sexual relationship,
- The degree of their financial interdependence;
- The care and support of children among others.
It is also important to note that under the Family Law Act, a person could be in multiple de facto relationships. In addition, a married person could also be considered part of a de facto relationship.
It can also be the case that a person can be married but also simultaneously in a de facto relationship. This can often be the case for persons who work interstate or regularly travel long distance for their work.
The Family Law Act recognises that a person could be in multiple de facto relationships.
Breakdown of the Relationship
An analysis of de facto law only comes into play when the relationship breaks down and a determination of division of property and parenting takes place.
There are four criteria that are used to assess whether a claim for property settlement or maintenance can be made in respect of the relationship when it comes to Family Law matters:
- That the period of the de facto relationship is at least 2 years;
- That the relationship is or was registered under a prescribed law of a State or Territory;
- That there is a child of the de facto relationship;
- That significant contributions were being made by one party and the failure to make an order would result in a serious injustice.
In order to commence proceedings in the Federal Circuit Court or the Family Court one of the above requirements needs to be satisfied. The matter will then be dealt with by the Court just as proceedings involving a legally married couple would be.
In assessing any division of property, the Family Court makes certain considerations including what each partner owned before the relationship, the net value of current assets and the contributions made by each partner in the course of the relationship.
Some de facto couples make financial agreements concerning how their assets will be managed. This could be done before moving in together, during the relationship or after separation.
However, in order to be binding, such agreements must comply with certain formal requirements, which is why it may be necessary to seek legal advice.
Do I need to make provision in my Will for my de facto partner? Can my de facto make a claim upon my Estate?
If you are in a de facto relationship, it is very important that you seek the advice of a Solicitor when making your Will. It is important that consideration is given to any person or persons who could have a potential claim upon your Estate.
A de facto partner is a person in the class of persons who would be eligible to make a claim on your estate if adequate provision is not made.
The Succession Act gives you the right to a share of your deceased partner’s estate if the person dies before he or she prepares a will. In addition, de facto couples enjoy the same rights to social security as legally married couples.
If your de facto partner dies in the course of employment, you could be entitled to receive compensation and financial support under the Commonwealth Social Security Act.
By discussing the nature of your relationship with our experienced Solicitors, you can be advised how to best protect your estate from future claims.
Please contact our office to arrange an appointment. We look forward to assisting you.
Protect Family Assets
Joseph John Gilles
Some people think that Family Trusts only apply to people with lots of money. This is wrong.
Assets typically held in a Family Trust include real estate, cash, shares and non-income producing assets such as holiday homes, boats and even luxury cars.
A primary reason to set up a Trust is to hold family assets and distribute inheritances to the right people. Further, a Family Trust can be used in conjunction with a Centrelink approved Special Disability Trust if any of your children have a disability which is NDIS approved.
The Trust acts as an investment vehicle and by quarantining its assets, protects your children and grandchildren from any business or personal risks. It also protects them from business activities carried on by other members of the family group.
These Discretionary Trusts are eminently flexible. You can provide different percentages or amounts to different family members which can change from year to year. This can be useful for meeting family or commercial goals. Income can be allocated in the most tax effective way to low income family members.
Even though Trusts can be set up for as little as a few hundred dollars through an Accountant, your Lawyer will make the Trust suit your particular family’s needs. No family is alike. Getting something off the shelf will not solve the problem of dealing with your family’s needs. This does not mean that the cost of a Family Trust set up by your Solicitor will be prohibitive. This depends on what you want in it. The rule of thumb is it does not have to be complex, but it has to deal with your particular family’s needs.
A Trust set up in a Will with a Special Disability provision for a disabled child will necessarily be more costly than one where there is no disabled child, however the benefits to a disabled child will far outweigh the extra cost.
In the event that you set up a Family Trust whilst you are alive for the same reasons, then it is advisable for a Trustee Company which holds no other assets and has no other activities, be the Trustee of your Trust.
A Testamentary Trust set up by your Will does not come into effect until after you die. There are substantial asset protection and tax benefits in holding assets in a Testamentary Trust. In the case of a marriage breakdown, they are particularly useful.
From a Taxation viewpoint, normally income paid from a Trust to a person under eighteen (18) attracts penalty rates. In the event that this income derives from a Trust set up under a Will, then even if the beneficiaries are under eighteen (18), they are taxed on that income at normal individual tax rates, as if they were an adult.
Remember, if you give your assets in your Will to a Family Trust controlled by your children, they do not own the assets but merely have the assets available to them to take, for example as an interest free loan repayable on demand.
Even though The Family Court has power to direct Trustees of a Family Trust to act a certain way, it is unlikely that a Judge would order this if the assets being talked about are derived by a member of the family from their parents’ Testamentary Trust. The Judge has to consider that the Trust is set up not only for the child who is in the Family Court case, but also for the child’s children and grandchildren.
In simple terms, assets held in a Trust derived from a parent are said to be a “Resource” under the Family Law Act and not “A Financial Asset”. See us for advice on the benefits of setting up a Family Trust whilst you are alive or in your Will.
Superannuation and Wills
Did you know that your superannuation does not automatically form part of your Estate when you die?
Unlike your family home, investment properties, shareholdings, bank accounts and other assets, your super balance is not legally owned by you. Your superannuation member balance is in fact held by the Trustee of your super fund on your behalf.
What this means is that your super balance will not automatically form part of your estate when you die but rather it will be at the discretion of the Trustee of your super fund to distribute to whomever and however they choose.
So how can you ensure that your superannuation fund is distributed in accordance with your wishes?
By signing a binding death benefit nomination (‘BDBN’) you can ensure that your superannuation is distributed to your nominated beneficiaries.
A BDBN is a written direction to the trustee of your superannuation fund that nominates the individuals who you want to receive your benefit in the event of your death. It must be completed strictly in accordance with the Superannuation Rules and must be renewed every three (3) years.
Depending on whom you wish to include in your BDBN you may need to update your Will to ensure that your other beneficiaries receive their appropriate entitlement from your other assets when you die.
Alternatively you may seek to nominate your Legal Personal Representative as the beneficiary in which case any superannuation death benefit will form part of your deceased estate. If you wish to seek advice on Superannuation and how it affects your Will please contact our office.
The Real Estate Exclusive Agency Agreement
Gregory George Eliades
Barry decides on XYZ Real Estate, Agent Harry to sell his property at auction. Harry has estimated the property’s value much higher than other appraisals. After signing the Agreement Barry realises Harry has terrible people skills and couldn’t sell a pair of shoes let alone his prize real estate possession. Barry is informed that he has not signed a 3 month exclusive agency period but in fact granted XYZ Real Estate a 4 months retainer!
The Agency Agreement provides that the exclusive rights period entitling the Agent to sell the property is 3 months. However, if that period exceeds 90 days then Barry is required to give 30 days’ notice to terminate the Agreement.
Usually the agent in preparing the Agreement will insert a 3 calendar monthly period e.g. 1/4/2020 to 1/7/2020. This in itself exceeds 90 days and hence the 30 day Notice is required in effect giving the Agent 4 months to sell your property! In most common situations this extra month is not explained to the Vendor.
Please make sure you read and understand the Agreement you are signing. Our office informs our clients to let us look at the Agency Agreement BEFORE it is signed so you know your rights and so that the Agreement can be amended to the terms you believe were explained to you and ultimately agreed to.
For assistance with these or any other legal issues, contact us at (02) 9661 6044 or drop by our office at Lvl 1, 506 Bunnerong Road Matraville to make an appointment or email your enquiry through to [email protected].