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  • Freya Savage

Financial Protection in a Relationship

No one wants to think about their relationship going south, but the reality is that 85% of all relationships will end before death-do-us-part. It is smart to protect yourself even if the relationship is great.

If your relationship ends and it is seen by the system as a de-facto (more than two years together, or sharing expenses and assets) then your assets might be up for grabs.

I have a friend who owns her own home & her partner lives with her. He will likely have a claim to the growth value of the property from when he moves. My friend asked him to pay ‘rent’ in attempt to avoid them having claim to the property. The reality is that if the relationship ends the court will distribute the assets as what they believe is ‘fair’ and will look at the assets accumulated while together. Particularly the portion of the mortgage that has been paid off during the relationship, irrespective of if the contributions have been labelled as ‘rent’.

Asset ownership is important. There is a significant tax advantage or high risk of one partner being sued (think doctors, advisers, business owners) so it makes more sense to put assets in one partners name, but be mindful of the risk to the other partner. Where possible keep your assets seperate where you have seperate goals and joint assets where you have joint goals. You might have a mix. For example you might have a joint investment bond for your children's education. But you might have a seperate investment portfolio for your goal to start a business or move into part time work.

Do have a financial binding agreement to outline the separation of assets and debts in the case of a breakup. Get someone neutral to advice you on this.

Where a large sum of assets are involved Family Trusts can provide a layer of protection, think inheritance or family gifting here. The Family Trust can 'lend' the partner the money to purchase asset. If things do go sour and the other makes claims against the asset it will be offset by the loan on paper.  However the court has been known to claw back any questionable accounting and strategies, including superannuation contributions.

So be smart and be fair.

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