New relationship? Protecting yourself

Almost 50% of all Australian marriages end in divorce.  The breakdown of de facto relationships is greater.  Separated spouses may seek a share of the assets of the relationship. T his includes assets held both jointly and solely by the other spouse – irrespective of whether the assets were acquired before the commencement of the relationship or after separation.

Protecting your property

Married and de facto couples can enter into formal agreements defining their respective entitlements even if separated.  These agreements can therefore avoid legal disputes arising after separation.  They can also reduce the possibility of disagreement arising between the parties during the relationship.  A full discussion and agreement in respect of domestic finances can assist the health of the relationship and avoid relationship breakdown.

Financial Agreements

The Family Law Act allows married couples and de facto spouses to enter into Financial Agreements before entering marrying or commencing de facto relationships, and also during marriages and de facto relationships.  If the Agreement has been properly made, a Court cannot make an order in respect of property settlement or spousal maintenance inconsistent with the Agreement except in limited circumstances.  Each spouse must obtain independent legal advice about the agreement.  There are some limited grounds on which a spouse can seek to setting aside of a Financial Agreement.

Financial Agreements require careful consideration and planning.  It can be difficult to determine at the commencement of the relationship what might be a fair division of property at a future point in time.  Commonly, following separation, one spouse will consider that the agreement is prejudicial to them by limiting the amount of property to which they otherwise would have been entitled.  They may consider if there are grounds to vary or set aside the Agreement.

It is also important to review agreements from time to time on significant events such as the purchase of property, or the birth of children.

Practical steps in protecting your assets

One or both spouses may not want to enter into a formal agreement such as discussed above.  It is still possible to take practical steps which may limit the entitlement of the other spouse upon separation.  Such steps include:

  • Keeping property and finances as separate as possible.  For example, hold separate bank accounts, and avoid acquiring jointly held assets.
  • Keep financial records.
  • Keep your assets separate from your spouse.
  • When acquiring significant assets such as real estate during the relationship, consider how they are to be held – for example, solely, jointly, or by a third party such as a company or trust.
  • If significant gifts or loans are received from family or friends, keep documents evidencing such gifts or loans at the time of receipt.
  • Do not accept liability for debts of your partner.  For example, avoid joint loans, giving guarantees, becoming a partner or director in their business.
  • Review your Will.
  • Review the beneficiaries you have nominated of your insurance or superannuation policies.

Avoid having your partner work in your business.  If they do, pay them an appropriate wage to avoid subsequent allegations of their non-financial contributions to your business.

Protecting your assets when entering into a new relationship

Nearly half of all Australian marriages end in divorce.  The breakdown in de facto relationships is even higher.

This page considers how couples can protect their property by entering into Financial Agreements.  It also makes some practical suggestions on how to manage your personal finances and how to protect yourself in the event of a future separation.

 

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