Commonly known as a “pre-nuptial” or “pre-nup”, a contracting out agreement can be a saving grace in the unfortunate event that you and your spouse/partner separate, or one of you passes away. 

These agreements are your best protection if you want to avoid some or all of your property being divided in accordance with the Property (Relationships) Act 1976.  The general rule under the law is when you have been in a qualifying relationship (de facto, marriage, or civil union) for three years or more, all “relationship property” should be divided equally in the event of separation. 

The purpose of a contracting out agreement is to “opt out” of the usual relationship property laws, to the extent necessary.  They can set out what property you and your spouse/partner own that is “relationship property” and what is “separate property”.  They can also set out what you would each receive in event of separation or death, and how the division of property would happen.  They can make the separation process more straightforward, both financially and emotionally, and provide you both with certainty. 

When to consider a contracting out agreement

A good time to consider a contracting out agreement would be: 

  • When you have entered into a new relationship with your own assets (such as your home or business); 
  • If you have made a large contribution to your or your spouse/partner’s assets and you want that contribution protected; 
  • You are purchasing a new property with your spouse/partner, and you don’t necessarily want that to be subject to an equal division in the future; 
  • If you have received an inheritance and want to use that to pay down your mortgage, but want to protect that amount as your separate property; 
  • If your parents are giving you a gift of money/assets in order to help you buy a home, or repay debt; 
  • If you and/or your spouse/partner have children from previous relationships, and you want to ensure they are financially well provided for in the event of death. 

While you might be happy for your spouse/partner to share the use of any gifts/inheritances/assets you might have while you are together, it is important (albeit uncomfortable) to consider whether you would be happy with these assets being divided between you if the relationship ended.  Having these somewhat awkward conversations with your partner now can save a lot of stress in the future.  Your first step should be to take legal advice, so you know exactly where you stand and can consider how to approach the situation.  

Legal advice

It is important (and also a requirement for the agreement to be legally binding) that you receive independent legal advice on a contracting out agreement.  They can be convoluted and tricky, and there are a number of potholes you can unwittingly fall into if the full picture is not carefully thought through.   

It is important you have a family law expert on your side ensuring your interests are protected, who can work with you to ensure that the agreement is as watertight as possible.  Agreements can be invalid or overturned when the proper process isn’t followed. 

You can enter into a contracting out agreement at any time during your relationship, but it is easier to do so before the relationship property laws apply.   

It is also important if you already have a contracting out agreement to get it reviewed regularly.  You should review these agreements (with the benefit of legal advice) at least every 3-5 years, or when your or your partner’s financial or non-financial circumstances change.  For example, you might have just purchased a new property together, one of you has quit your job, or you have had a baby.  All these changes could impact how fair the arrangements under the Agreement are. 



If you would like to speak to one of JB Morrison’s relationship property experts about getting or reviewing a contracting out agreement, please get in touch. 

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Contracting Out Agreement