When I say “STD” I’m not referring to the type where “D” stands for disease and you would need to see your doctor, I’m referring to debt.
At the start of a relationship, one does not enter into the relationship with a goal of separation and the desire to have a property settlement. In today’s society, however, the statistic for the breakdown of relationships is high and the need to protect ones’ self is even higher.
Consider the circumstances where:-
- Adam and Eve are in a relationship and have decided to move in together;
- Eve has her own residential property with equity, an investment property which is mortgaged, her vehicle, cash savings and superannuation;
- Adam has no property, minimal superannuation, no cash savings, credit card debt of $25,000 and his sole trader business with an overdraft of $50,000.
Eve will want to protect herself into the future in the event the relationship breaks down. The longer the relationship between Adam and Eve, the greater the possibility that Adam may start to be entitled to a percentage of what Eve has financially created prior to the relationship and increased during the relationship. Eve will also want to protect herself from any liability that Adam has with respect to his credit card debt, overdraft and any possible claim that might arise against Adam’s business in the future which may jeopardise the assets Eve has and her unblemished credit rating.
The best mode of protection for Eve is a Financial Agreement drafted pursuant to the Family Law Act which will quarantine the assets and liabilities of each party so that if the relationship breaks down, then Eve will not be liable for the debts Adam brought to the relationship and Adam will not be able to claim against the assets Eve has brought to the relationship.
This is obviously a very simplistic view and most matters, whilst they may not seem complex to the untrained eye, have complexities which must be considered based on a number of factors such as the possible length of the relationship, whether the parties will have children, age and income earning ability. For these reasons, each party will need a separate lawyer from independent law firms where dedicated family lawyers are able to work with each other and the parties to respectfully and tactfully draft the agreement and provide the written advice to ensure the agreement is as binding as possible and does not impact on the new relationship.
Other considerations for Adam and Eve might include:-
- Having new Wills and Enduring Powers of Attorney drafted;
- Notifying Centrelink if benefits are being received by one or both parties;
- Whether the correct beneficiary is nominated with your superannuation fund;
- Whether you contribute to a joint account for living expenses or whether you maintain separate accounts and keep your financial affairs separate so as not to intermingle the finances;
- Private health insurance and the Medicare rebate and whether the other partner’s income changes your rebate;
- Business structures, the creation of a family trust, distribution of income and other tax planning.
Be proactive and protective in your new relationship. Seek advice at the earliest opportunity to establish how best to protect yourself.
Author/Director: Sophie Pearson