Cohabitation Agreements
Cohabitation Agreements (also known as “prenups”) are a type of Binding Financial Agreement that may protect your interests.
A cohabitation agreement is more than just a piece of paper—it’s a legally binding document that sets out how you and your partner will manage your finances during your relationship and if things don’t go as planned.
This agreement provides clear, legally binding instructions on how you both will handle your financial resources now and in the event of a future separation.
It’s all about making sure there’s no confusion, so both parties know exactly where they stand.
What about fidelity?
In some cases, these agreements even include a “fidelity” clause, which is becoming more popular as concerns about infidelity grow. This clause can mean there is a different financial outcome at the end of the relationship based on whether there has been infidelity during the relationship.
Protecting what’s yours
It’s also crucial to cover both separate and shared assets. The agreement should clearly define what belongs to each partner individually and what will be considered joint property. This clarity helps avoid disputes over property division in case of a breakup.
If you’re considering a de facto relationship or already in one, a cohabitation agreement can help safeguard your separate assets and protect your respective financial circumstances.
To make this financial agreement enforceable by law, it’s important that both parties receive separate legal guidance under the Family Law Act 1975. Having legal guidance ensures that the agreement holds up in court and that neither party can later claim they were pressured into signing.
Consider how the agreement will work out long-term
When thinking about a cohabitation agreement, it’s important to consider how it might play out over time. While these agreements can provide clear, legally binding terms to protect your monetary resources and separate assets, they can also have unintended consequences.
Take this example: if you start the relationship in a stronger financial position but end up worse off, you might look back and wonder if signing that cohabitation agreement was the right move. The agreement, while meant to protect, could end up working against you if the circumstances shift.
What could change?
That’s why it’s important to think about the long-term impact. How might your respective financial circumstances change over time?
Are there provisions in the binding financial agreement that accounts for shifts in your financial situation? Considering potential changes to shared assets and future debt obligations is also vital.
To make sure you’re fully protected, always seek independent legal advice before signing. This advice ensures that the agreement under the Family Law Act 1975 is not just fair now but remains fair in the years to come.
Protecting your finances with cohabitation agreements
Cohabitation agreements are especially important when you have children and start a new relationship or marriage. You want to protect what you’ve built financially, ensuring that your assets are secured for your children if things don’t work out.
Simply having a Will isn’t enough—especially if the relationship ends before you pass away. A cohabitation agreement provides that extra layer of protection, ensuring your finances are safeguarded.
How to make it binding
For these agreements to hold up legally, each person needs to receive independent legal advice and have their own lawyer sign a Certificate of Independent Legal Advice. This step is crucial in making the cohabitation agreement legally binding under the Family Law Act 1975.
Signing under pressure? Think again
It’s also important to remember that you can’t force the other party to sign. If someone feels pressured, the agreement might later be set aside by the Family Law Court on the grounds of “duress.”
So, while cohabitation agreements are powerful tools for protecting your finances and ensuring your children are looked after, they must be entered into freely by both parties to stand the test of time.
What to include in a cohabitation agreement
When drafting a cohabitation agreement, here are key points to consider to ensure comprehensive coverage:
- Separate and Shared Assets: Specify what belongs to each partner individually and what is joint property, such as real estate, money, or business interests. This helps prevent disputes over asset division in case of a breakup.
- Debt and Liabilities: Clarify how debts will be handled, distinguishing between joint and separate obligations, and outline how these will be resolved if the relationship ends.
- Household Contributions: Define how household expenses—such as rent, utilities, and groceries—will be shared. Clear expectations can prevent future disagreements.
- Maintenance Payments: If one partner needs financial support after a breakup, the agreement should specify the terms of any maintenance payments.
- Children and Previous Relationships: Include provisions to protect the financial interests of children from previous relationships, detailing how assets will be managed to ensure their well-being.
Case Study: Safeguarding Assets with a Cohabitation Agreement
Background: A couple in a de facto relationship decided to move in together. One partner owned a business and a home, while the other had savings but was concerned about potential debt risks.
Solution: They drafted a cohabitation agreement to clearly define their separate and shared assets. The agreement ensured that the home and business remained separate property and outlined how they would handle joint expenses and any future debts.
Outcome: When the relationship ended, the agreement allowed for a smooth and conflict-free separation. Both parties retained their respective assets, and financial responsibilities were clear, demonstrating the agreement’s value in protecting individual interests.
Frequently Asked Questions
A cohabitation agreement is specifically for couples living together in a de facto relationship or who are married and outlines how their financial assets and responsibilities will be managed during the relationship and in case of a future breakup.
A BFA is a broader term under the Family Law Act 1975 that includes agreements made before, during, or after a relationship or marriage, including cohabitation agreements. Essentially, a cohabitation agreement is a type of BFA.
Yes, cohabitation agreements are legally binding under the Family Law Act 1975, provided that certain requirements are met. Both parties must receive legal advice before signing, and each must have a lawyer sign a Certificate of Independent Legal Advice. This process ensures that the agreement is valid and enforceable in court.
Yes, a cohabitation agreement can include provisions to protect the financial interests of children from previous relationships. This might involve specifying how separate assets or financial resources will be managed to ensure that these children are financially protected in case of a future breakup.
If one party is pressured into signing a cohabitation agreement, it could be set aside by the Family Law Court on the grounds of “duress.”
To avoid this, it’s important that both parties enter the agreement freely and receive legal advice to ensure that their rights are fully protected.
Yes, a cohabitation agreement can be amended after it’s signed, but both parties must agree to the changes. The revised agreement must also comply with the Family Law Act 1975, which means that both parties will need to receive independent legal advice regarding the new terms.
The updated agreement must be signed and certified by each party’s lawyer to remain legally binding.
Cohabitation agreements can cover debt obligations. The agreement can specify which debts are joint and which are separate, and outline how these obligations will be handled in the event of a future separation.
This helps ensure that both parties are clear on their responsibilities and can prevent conflicts down the line.
Secure Your Future with Confidence
A cohabitation agreement isn’t just about preparing for the worst—it’s about protecting what matters most to you and your partner, both now and in the future. Whether it’s safeguarding your financial assets, ensuring your children’s financial security, or simply setting clear expectations, this legally enforceable document offers peace of mind.
By outlining your rights and responsibilities upfront, you can avoid potential conflicts and focus on building a strong, healthy relationship.
Ready to protect what’s yours?
Don’t leave your future to chance. Get in touch with us today to discuss creating a cohabitation agreement that’s tailored to your unique situation.
Our experienced team is here to provide the guidance and legal support you need to move forward with confidence. Let’s make sure your assets are fully protected, along with your peace of mind.
Or call us on 1300 365 108