Ways to Protect Your Heart and Your Assets This Valentine’s Day Family Law Advice

Written by Mackenzie Wright

Dating is scary. Losing your assets is scarier.

If you haven’t already booked a table for Valentine’s Day, let this be your gentle reminder to do so. While Valentine’s Day is a day all about romance, flowers, chocolates and candle-lit dinners, it’s also a good opportunity to pause and think about something slightly less exciting, but incredibly important.

That is protecting yourself financially. 

Most people don’t think family law (or family lawyers) are relevant to them until after a separation, but that is not the case. We understand that when people get into a relationship, Finances are rarely at the top of the list to discuss. However, if you have:

• Bought or are about to buy a property together;

• Have gotten into a relationship where you already own, or are buying a property independent of your partner;

• Have moved in with your partner and/or have intertwined finances and/or significant assets;

• Are starting, or own a business, trust, partnership etc, or

• Have received an inheritance, or a large sum of money;

You may want to consider getting advice on how you can protect your assets. Just like making a Will, no one wants to think about these things, but they can make a big difference when life doesn’t go to plan.

What is a prenup?

A prenuptial agreement isn’t a prediction that your relationship will fail; it’s a way of setting clear expectations and boundaries. In Australia, prenups are known as Financial Agreements.

They can be entered into:

• Before marriage or a de facto relationship;

• During a relationship or marriage, or

• After separation or divorce

  A financial agreement allows couples to decide, in advance and without the consent of the Family Court, how their assets and liabilities will be dealt with if the relationship ends. A Financial Agreement can:

• Set out how property, liabilities and financial resources will be divided;

• Protect assets brought into the relationship (such as property, companies, and inheritances

• or savings/shares);

• Reduce the risk of lengthy and expensive court proceedings; and

• Allow couples to control their own outcomes, rather than leaving decisions to a Court (if agreement cannot be reached).
  

  It’s also important to note that a Financial Agreement is only legally binding and effective if both parties receive independent legal advice. This means you must have your own lawyer, and your partner must have a separate lawyer, each advising you about your rights, the advantages and disadvantages of the agreement, and the effect the Agreement will have on you.

  This requirement exists to ensure that both parties understand what they are agreeing to, and that the agreement is entered into freely, fairly and with proper advice, so it actually does what it’s intended to do.

Can I just put everything in a trust to protect myself?

The short answer is no.

A common misconception is the belief that assets held in a trust or company are automatically protected from family law claims. Unfortunately, that’s not the case.

While trusts can be effective for tax planning, succession planning, bankruptcy protection and safeguarding vulnerable beneficiaries, family law takes a much wider view of what constitutes “property”. Under the Family Law Act 1975 (Cth), the definition of “property” is broad and can extend well beyond assets held in your personal name. It may include:

• Real Estate;

• Cash savings and funds held in bank accounts;

• Motor vehicles, boats and other vehicles;

• Digital assets, including cryptocurrency and NFTs;

• Listed and unlisted shares and investments;

• Personal property such as household contents, antiques, artwork and jewellery;

• Lottery or gambling winnings;

• Inheritances (received or anticipated);

• Employee entitlements, including long service leave and redundancy payments;

• Business interests and business assets;

• Interests or assets held through trusts or companies;

• Embryos;

• Liabilities such as credit card debts, personal loans, tax liabilities, and loans owing to or by third parties.

In practical terms, this means that:

• Trust assets may be included in a property settlement, either as property or as a financial resource;

• Company assets may be taken into account, even where they are not held in your personal name;

• Asset-protection structures that may be effective outside family law often provide little protection in a relationship breakdown.
  

Put simply, if you control it, benefit from it, or are able to influence it, there is a strong likelihood it will be considered in any property settlement.

Important Disclaimer

The above information is general in nature and provided for educational and informational purposes only. It is not legal advice and should not be relied on as such. Every situation is different, and you should seek independent legal advice before making decisions about your own circumstances.