Clients often ask me variations of the question ‘Aren’t I/my ex entitled to 50% of the assets just because we were married or lived together?’.

My answer, greeted with either tears or a happy sparkle depending on who has asked the question, is ‘No, not necessarily’.

Contrary to what many people have gleaned from American television, reading celebrity magazines or talking to their friends and family, Australia is not a country where living together or even marrying automatically entitles one spouse to a share of the other’s assets.

A crucial step is to determine who owns what. This does not conclusively address who gets what, but it is the starting point when trying to figure out what, if any, share of the assets each person might receive.

It used to be that people (generally the poorer or non-business spouse) could be fairly confident in most cases of receiving at least a modest share of the other’s wealth in recognition of simply turning up and being in the relationship and making some form of contribution.

However, that changed after a 2012 decision of the High Court (called Stanford).

Now, a person seeking a property settlement must first demonstrate that it is just and equitable to alter property rights. That is, they must satisfy the court that it should make any property settlement orders at all.

The underlying law has not changed but the decisions are seen to becoming tougher.

In a number of cases decided since Stanford, even after a long relationship, the court has found that it was not necessary in the service of justice and equity to change the parties’ rights in their respective assets. This meant each spouse kept what they owned in their own names.

The Court greatly emphasised some of the facts in these cases – such as, the couples did not blend their finances, did not buy joint assets or have joint accounts or raise children together.

Depending on whether you are the wealthier or the non-business spouse, some issues to consider when you are in the intensely romantic phase of your relationship, and can potentially influence the outcome, are:

  1. Should I hold out for marriage?
  2. Should I insist on assets being placed in my name?
  3. Should I transfer shares in my company to my spouse or give them a role in my trust or self managed super fund?
  4. Should we have joint bank accounts and investments?
  5. What should I contribute to the other person’s assets?
  6. Should I enter into a financial agreement about what will happen to the wealth at separation to improve my entitlements or limit those of my spouse?
  7. How will I implement my plans if my spouse is the one with most of the decision-making power?

These issues can be confronting in the hearts and flowers period of a relationship but can have a profound impact upon a couple’s entitlements in the event of separation.

In particular, if you are the less wealthy spouse, you should not automatically assume that you will get any, let alone 50%, of your partner’s assets in the event of a separation. Think carefully then about what sacrifices you are prepared to make for your partner and the relationship.

Conversely, if you are the wealthy spouse, it is worth examining the options available to protect your wealth. These options include entering into a financial agreement. The recent case of Thorne v Kennedy, decided by the High Court on 8 November 2017, suggests that to be effective, a financial agreement cannot be too harsh or imposed at the last minute. In that case, the High Court set aside financial agreements that were found to be ‘grossly unreasonable’ and signed by the poorer spouse when she was subject to undue influence and the unconscionable conduct of her elderly fiancé.

Each of the decisions you make along the way while you are together can have a significant impact on what might happen.