Falling in love – happily ever after
05 Jun 2013
You were happily single before falling for a new person in your life. A genuine love interest.
Things move quickly and you decide to move in with your partner.
Only problem is it's your place. You saved for it. You have been paying it off and it is your pride and joy!
Before you know it, you are called a 'de facto' couple.
You may have no intention of getting hitched, but you need to know what might happen if things don't end up 'happily ever after'.
As a 'de facto' couple, property and other assets are now dealt with under the Family Law Act if you and your partner separate. Recent legal changes have meant that de facto couples can now choose to 'contract out' of the Family Law Act, by creating a financial agreement which overrides the property settlement provisions of the Act.
The best way to protect, or quarantine, those assets from a property settlement claim is through the use of a financial agreement.
Generally, the law requires you to demonstrate that:
- you have lived in a de facto relationship for two years; or
- you have a child or children together; or
- you have made significant contributions to the relationship.
So, if you are planning to live with your partner, by signing a financial agreement you can protect your property from a claim or clarify how that property will be split if you were to break up.
There are also other practical steps to help protect your assets if you are in a new relationship and are unsure how the union may end up. In fact, it may be sensible to organise your finances just in case things 'don't work out'. This can involve challenging conversations with your new partner, but it is better to address these issues early in the relationship to help protect your finances.
Ten keys to success are outlined below:
- Keep your property and finances as separate from those of your partner as possible. For example, hold separate bank accounts.
- Contribute equally or at least clearly agree your share of the household expenses.
- Consider how real estate should be held, for example, solely, jointly or by a third party, such as a company or trust. By holding the property in your name, the home will be free from capital gains tax when you sell it (subject to whether you rent it out in the future as an investment property).
- Keep records of all financial transactions during the relationship.
- Keep assets held prior to the relationship in your sole name. Avoid selling such assets and rolling them over into jointly owned property. If you do, keep clear records of those contributions to jointly owned property.
- Keep lump sums of money received during the relationship in your name and avoid placing them into jointly held assets.
- If significant gifts or loans are received from your family, document such gifts or loans at the time of receipt, for example by setting up a loan agreement.
- Avoid accepting liability for debts of your partner. Avoid entering into joint loans, giving guarantees or being a partner or director in their business.
- Make a Will setting out what will happen to your property on death.
- Consider whom you nominate as beneficiary of any insurance policy or superannuation funds.
Although these steps will not prevent a claim in respect of the assets you bring into the relationship, they should assist with clearly identifying your contributions, which is important when determining your entitlements.
In addition to the above tips, setting up a financial agreement through a solicitor may be a smart strategy if you move in with your partner. Also see a financial adviser to help guide you through the issues - they can introduce you to a solicitor if you need specialist legal assistance.
Here's to living happily ever after!
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