Most people enter into a relationship with a sense of loving and hope and positive outlook for the future. However it is becoming increasingly common to also take precautions to protect your assets in the event that the relationship does not survive.
The most formal approach adopted for protection of assets, is for the parties to the relationship to enter into a binding financial agreement. This is a legal document which must comply with the requirements under the Family Law Act and requires both parties to the relationship to obtain their own independent legal advice. A binding financial agreement is a legally enforceable contract between the parties which provides what will occur in the event that their relationship ends in the future. This is a complex document as it sets out what is to happen in the future, and often provides for different results if different events occur, such as the partners having children. It is not usual for partners entering into a binding financial agreement to spend in the vicinity of $10,000 by the time you consider the legal fees for each of their separate, independent legal advisers.
A recent decision of the Full Court of the Family Court of Australia has opened up the possibility of a more informal approach being adopted by persons in a de facto relationship, to the protection of their assets. The case is Chancellor & McCoy.
This case found that due to the way in which two ladies in a de facto relationship lived their life together over twenty-eight (28) years it was not just and equitable (fair) to make any changes to the legal ownership of their assets. Both parties to the relationship retained the property and superannuation that was in their respective names.
The ladies during this 28 years had never had a joint bank account, had never owned any joint property and had kept their finances separate, not discussing financial matters with each other to the extent that they were not truly aware of the other’s financial position and were not accountable financially at all to the other.
Steps to take to protect your interests on entering in a de facto relationship
The most effective method is to enter into a binding financial agreement prior to commencing your de facto relationship.
If costs prevent a binding financial agreement, give consideration to the following:
- Maintain separate bank accounts to your partner
- Do not ever have a joint bank account
- Avoid purchasing any joint assets
- The co-purchase of some items of furniture may not impact.
- If you are living in a property owned by one of you, ensure that if there is payment by one party to the other, it is documented as board or rent.
- Do not discuss financial matters which each other
- Conduct your financial affairs entirely separately to each other
- Do not have any future financial goals
- Do not make provision for each other as potential beneficiaries pursuant to your superannuation or terms of your will
Option two was proven to prevent a claim for property adjustment in a 28 year de facto relationship in the case referred to above. How people conduct their relationships is a matter of choice and we at D A Family Lawyers would always suggest that when entering into a relationship, there are many considerations, not all of which are financial. It is important to consider all of the intricacies of being in a relationship and the mutual love, understanding and emotional benefits any relationship can bring to the persons involved.