If you are not legally married but are in a relationship with another person and living with them on a genuine domestic basis, you are deemed by the court to be in a de facto relationship.
Asset protection planning for individuals in a de facto relationship does not necessarily mean the couple is separating—or they could be. Whatever the case, if you want to protect your assets and properties, it’s best to develop a sound and effective asset protection strategy long before the possible need for it arises.
One of the best ways to prepare for future legal ramifications caused by your de facto relationship is to draw up a financial agreement with your partner. Here’s how:
- Compile a comprehensive list of assets each of you had at the beginning of the relationship
- Upon deciding to draw up a legally binding financial agreement, keep your finances separate. Proceed by:
- Not combining your finances
- Not having a joint bank account
- Not having any joint ownership
- Having each of you responsible for your own individual debts and liabilities
- Having each of you make financial decisions with no accountability to your partner
- Having no evidence of intent to provide for your partner in a will or as a beneficiary of your superannuation funds or life insurance policies
- Having your partner contribute board/rent if you own the home both of you as a couple live in (or vice-versa)
One of the greatest advantages of having a de facto asset protection measure, such as a comprehensive legally binding financial agreement, is having a degree of certainty—even a sense of comfort and peace of mind.
In the event that you, as a couple, decide to break up and lead separate lives, each of you has been protected and kept from exposing your assets and properties to certain risks, which may include devastating legal consequences.
Remember that in some cases, one of the couple, post-relationship, might apply to the court to have the agreed upon financial agreement set aside.
The remedy to this should be done long before this complication arises: make sure your binding financial agreement is prepared properly, with both parties providing full financial disclosure after each has obtained individual legal and fiscal advice. This will reduce, or even terminate altogether, the risk of having one partner requesting the court to set aside said financial agreement.
If you have a child or children from your former de facto relationship, and you are now entering a second or third de facto relationship, make sure to safeguard your child’s/children’s inheritance by entering into a deed of release as promulgated by law. This prevents claims on the inheritance and shields it from other similar legal attacks.
Sometimes, it may also be necessary for you to protect yourself from your former partner insisting that he or she made indirect financial contributions to your assets or properties during the course of the de facto relationship.
Examples of these claims include your partner asserting he or she spent on renovation work on your home and other similar activities. When this happens, be sure to seek the aid and advice of an expert lawyer on the specifics of the legal threat and how you can reduce or terminate it altogether.
Again, due preparation and comprehensive planning are key in ensuring you and your assets are protected when your de facto relationship breaks down.