Have you worked hard for your money and want to protect your assets before starting a new relationship?
It’s quite common for our firm to be asked, “How can I protect my assets if I go through a separation?” or “I’m thinking about moving in with my new partner, can I protect my assets?”.
Generally, we are asked these questions where one party has generational wealth, there are businesses involved, an expected inheritance or someone has simply worked hard to accumulate their property pool over the years.
We are also seeing an increase in people commencing relationships later in life. This normally leads to one or both people coming into the relationship with some form of significant asset/s.
If this sounds like you, you may want to consider what is commonly known as a “Pre‑nup”. In Australia, they are called Binding Financial Agreements. Binding Financial Agreements set out how some or all of a couple’s assets will be divided in the event of a relationship break down.
A Binding Financial Agreement can be drafted:
— before marriage or a de facto relationship commences
— during marriage or a de facto relationship
— after divorce or separation.
There are advantages and disadvantages with entering into a Binding Financial Agreement at different stages of your relationship. Depending on your circumstances, a Binding Financial Agreement may not be suitable for everyone, so we recommend speaking with a lawyer before making any big decisions.
The advantage of a Binding Financial Agreement, particularly before you enter into a relationship or during the early stages of a relationship, is that it allows you and your new partner to determine how the assets, liabilities and superannuation that have been brought into the relationship will be dealt within the event that you choose to separate. This means that you can protect what is important to you and have some certainty about how assets and liabilities will be distributed. They are also private, so there is no need for Court intervention to approve the agreement. This is particularly beneficial when you do not wish to go through the Court processes, which can sometimes be costly and drawn out.
The disadvantage of a Binding Financial Agreement is that you and your partner will need to obtain independent legal advice before entering into the agreement, which can cause the preparation of these agreements to be rather costly. You and your partner will also need to consider what you will need in the future in relation to other assets, or whether you intend to have children and how that will affect the Agreement entered into before or during your relationship. A Binding Financial Agreement can also be overturned by the Court, if not prepared correctly, or a party wishes to challenge the Agreement.
If a Binding Financial Agreement is not for you, there are other ways that you can protect your assets.
— Keep all records of financial transactions during the relationship.
— Consider keeping assets held prior to the relationship in your sole name rather than selling these assets and rolling them into joint assets.
— Keep your bank accounts separate, or discuss between you and your partner how you intend on sharing joint expenses.
In the event of separation, this won’t necessarily “exclude” your assets however, keeping these records will be beneficial in determining your contributions throughout your relationship.
Even in that early “love bubble” stage, it is important to turn your mind to protecting your assets moving forward. If you would like to speak with a lawyer about how you can protect your assets, contact our team at KLM Solicitors to schedule an appointment.
This article is not intended to advise you in relation to your specific circumstances and should be used as a general guide only.