Today, it is more common than not for couples to live together prior to getting married.
In fact, in Australia alone, about 80% of couples conduct this, potentially being able to ‘try before they buy’.
However, financial consequences regularly arise from this, as couples who have lived together longer than two years become susceptible to the possibility of their assets being claimable, as if they were already married. A recent article by the Daily Telegraph on 19 June 2017 ‘Reason at Romance’s Heart’, pronounces this very idea as it involves the comingling of you and your partner’s money which can easily result in a loss of assets. Due to this, preparation is key, as all individuals need to consider their options on the possibility their relationships may fall apart.
To protect your assets, lawyers suggest that it’s best to develop a thorough and effective asset protection strategy long before the possible need for it. This will enable you to have a safety net to fall back on if anything goes wrong within your relationship for the future. This can be implemented by a few tips and tricks outlined by the following.
Protecting your assets:
In any relationship, the ultimate way in protecting your assets that you bring to the table should always begin with a record keeping and valuation at the time your relationship begins. This forms as a base level to be financially secure and provide protection of your and your partner’s individual assets. Co-habitation agreements are a common way to outline a relationship, property rights and liabilities between a couple. They act as a basic pre-nuptial promise for couples to create in an effort to protect each party’s distinct assets.
Budgeting financial housekeeping can also maintain independence within a relationship. Household budgets are vital when living with your partner, particularly if separate bank accounts are to be upheld. This will reflect each partner’s responsibility and can act as a common test for compatibility, as you will not be bound by each other’s expenses. Finding out that your partner is a compulsive gambler if you are a savvy shopper could lead you to decide to end the relationship and having kept your finances separate, you have a better chance to keep your assets.
Owning a property and the decisions relating to this are extremely important in any relationship. The two distinct types for couples involve ‘tenancy in common’ or ‘joint tenancy’ and the difference could potentially impact you and your relationship. These two choices provide entirely different outcomes if a relationship, unfortunately, breaks down and therefore, can impact on your assets and financial protection. ‘Tenancy in common’ allocates each partner the direct ownership of a designated portion of the property, where each individual will be accountable for their own mortgage and own share of the property. On the other hand, ‘Joint Tenancy’ involves the agreement that a couple is jointly and severally responsible for the entirety of the property and mortgage. When renting, by adding your name to the lease you gain equal possession of the space and opportunity allowing for a better financial position if it comes down to the event of a break-up. If your name is not on the lease and the unfortunate event of a breakup unfolds, the person with their name on the lease has an upgraded position to continue possession of the rental property.
Personal Budgets and their impacts:
Before you or any couple agrees to rent a house or apartment together, you should consider creating an individual budget for all monthly bills, utilities and individual expenses to be conducted whilst living together. Alongside this, by purchasing items separately you utilise your ownership and possession of certain items within the relationship, therefore, recognising who owns what particular piece of furniture etc. In doing this, both parties can understand and respect their own contributions and ownership of items, in the preparation for any unfortunate event.
Talk about it!
Lack of communication regarding any finances in a relationship may result in money problems and lead to breakdowns. It is encouraged that all couples allocate time to talk about money with their partners and understand each other’s goals, plans and monitoring of finances. This will consequently ensure both individuals are on the same page and allow issues to be raised for any discussion. Warning! Do not fall into the trap where one partner controls all finances and decisions in a relationship. This is the biggest NO NO in being able to protect your assets and individual security. Money matters should be a joint decision in any relationship, providing stability and security to your asset management.
Our Felicio law firm team are here to help you with Financial Agreements (before, during and after marriage) contact our Erina & Central Coast family lawyers today.