Have a new partner? Here’s how to protect your assets in a new relationship

14 Mar Have a new partner? Here’s how to protect your assets in a new relationship

Love is grand! And entering into a new relationship can be really exciting. However, it’s also a good time to think about your financial position. And how you might want to protect it.

In Australia, you could be considered to be in a relationship before you may actually mean for that to happen. And that could mean your new partner might be entitled to a share of your assets if you separate or divorce. 

So it’s always a good idea to understand how the law treats relationships. And the impact this could have on your assets in the event of separation. This means you’ll be able to make informed decisions about your assets and wealth as you move forward with your new relationship! 

So when are you classified as a couple for asset purposes? And what can you do to protect your assets in a relationship when it ends?

Let’s explore.

How to protect your assets in a relationship

Why does this matter?

Before we dive into when you’re classified as a couple for asset purposes, we should talk about why it matters. It matters because once you’re considered a couple you are also then considered to have a property pool. This means that if you separate or divorce each of you (as part of the couple) will be entitled to a share of that pool. 

While division of a property pool can be complicated, with a lot of factors at play, each of you will likely have entitlements to this property pool. This could include assets that you brought into the relationship. That’s why it’s really important to understand what your legal relationship is.

So when are you classified as a couple for asset purposes?

When are you legally classified as a couple?

For legal purposes it doesn’t necessarily matter if you’re officially married or not. The court looks at a series of factors to determine when your relationship officially began. If you aren’t married you can certainly still be considered in a relationship. This is called a de facto relationship (under Section 60EA of the Family Law Act 1975), and it can apply to couples of either sex or the same sex, just as marriage can.

Often the court is called upon to determine if a de facto relationship exists. Even if you are married, but perhaps you lived together for a few years prior to marriage, you could be considered to have become a couple during the period prior to your official marriage. 

To determine whether a relationship is de facto the court may look at some or all of the following factors:

• The length of time the couple has been together. Typically you’ll be considered de facto (in terms of length of time) after about two years. But there are exceptions to this rule, such as if you have children together.
• Whether or not you live together.
• Whether or not you have a sexual relationship.
• The financial dependence or interdependence of the couple.
• If you’ve bought property together, or use shared property.
• How committed you are to having a shared life.
• Whether your family, friends, employers, etc. see you as a committed couple. 
• Whether you have children and how you care for them together. 

These factors will let the court determine when you should be classified as a couple.

How this impacts new relationships

Understanding when you will be considered de facto in your new relationship will let you make informed decisions about your money. It’s a great idea to get some advice unique to your situation from a lawyer who’s an expert in this area as well. Because once you become part of a couple (legally) your new partner will automatically be recognised as your next of kin. 

From a financial perspective, this means they will inherit life insurance and superannuation benefits and be the primary beneficiary if you die without a will. Of course, you can make changes to this arrangement via your will if you prefer. And, in the case of a separation, your new partner will be entitled to a share of the property pool. 

Steps for protecting your assets

Whenever you’re entering into a new relationship, it’s a good idea to consider how to protect your assets in the event of a relationship breakdown. 

1. Understand your legal standing. This means, understand the nature of your relationship and when you might be considered a couple from a legal standpoint. This is a great thing to seek advice on as well.
2. Consider a binding financial agreement. One of the best protections you can use is a binding financial agreement (BFA), sometimes referred to as a prenup. These agreements, which can be entered into at any time, including after your relationship has begun or you’ve been married, are designed to outline how your assets will be divided if the relationship ends. As both you and your partner will agree and sign, it can provide certainty to you both.
3. Keep your finances separate. If you’d like your money to be considered separate, keep it separate. Maintain separate bank accounts and avoid commingling funds. This will demonstrate your financial independence.
4. Document contributions. Keep track of who contributes what to the relationship – and by keep track we mean write it down. This is especially important for large assets like your home and your cars. 
5. Regular reviews. Your relationship will evolve, as will your financial situation. It’s a good idea to speak to your family lawyer whenever you have a change in either. 

By taking steps to protect your assets early in a new relationship, you’re ensuring that your financial future is secure, no matter what happens!

How Toomey Family Law can help

Here at Toomey Family Law, we specialise in family law, including divorce and separation cases. We can help you understand how your relationship might be viewed legally, and how to navigate the complexities of asset protection. 

Get in touch today or check out our free resources page for information that may be relevant to you.