Bank accounts are increasingly becoming a common source of strife and tension when a relationship ends. This tension arises from questions of whether separate bank accounts maintained in one party’s own name can be determined as relationship property therefore subject to equal division.
Property (Relationships) Act 1976 (PRA)
The PRA provides legal rules that determine whether assets are classified as relationship property or separate property at separation. This applies to the property of married couples and civil union couples, and of couples who have been in a de facto relationship of three years’ duration or longer.
In general, if an asset is determined to be relationship property, the PRA provides that it should be divided equally between couples. On the other hand, assets determined to be separate property are not subject to equal division. These rules apply to the extent that they are not altered by a relationship property agreement (also known as a contracting out or section 21 agreement).
Application to Bank Accounts
How do the legal rules treat bank accounts after separation? Under the PRA, the starting point is that bank accounts (whether maintained in separate names or joint names) will be relationship property where the bank account funds represent income earned during the relationship. Therefore, the courts will treat any bank account maintained during the relationship as relationship property unless it can be proven otherwise. For example, if a bank account that existed before the relationship is kept separate during the course of the relationship (i.e. does not contain any income earned during the relationship), it would be determined as separate property.
Intermingling with Relationship Property
Issues regarding classification may arise when separate property is mixed with relationship property or used for relationship purposes. Generally, bank accounts that hold a mixture of separate property and relationship funds will become relationship property.
A number of banks have introduced phone applications to monitor how much money is being spent each month and where the money is going towards. This makes it easier for couples to track the status of the funds in any bank account and determine whether it is being used for relationship purposes.
Disclosure of Separate Bank Accounts
An important financial decision that couples make together is whether they want to keep separate bank accounts. However, sometimes the existence of a separate bank account is not disclosed to the other partner and is only discovered after separation.
The law states that there is a legal duty to provide full disclosure of relationship property after separation. Therefore, there is an obligation for both partners to fully disclose their bank accounts when the relationship ends. This applies to either joint or separate bank accounts. If the Court makes an order for division of relationship property and later discovers that one party had not made a material disclosure, the Court has the power to set aside that order. Non-disclosure should be avoided as it could lead to further legal costs and delays for both parties.
If you are unsure about the legal classifications of your bank accounts, please seek legal advice from your lawyer.