Protecting those assets after Separation
Separation of couples can be an emotional rollercoaster and division of relationship property bringing finality to the couples assets and liabilities can be a welcome end to the saga.
Often people find themselves “starting over” with a financial setback. The reality is, whatever you come out with may set you up in a new home and you need to ask yourself ‘do I want to do this again’?
In practice I have completed many matrimonial settlements, more than I care to remember. My advice is always, “you will meet someone else and when you do remember my advice and protect your assets”.
Its really important that as we grow older that the assets we have worked to acquire don’t keep being divided with a partner in a break up. Critical assets like the main family home, car and household chattels, after a three year relationship, will be relationship property unless protection measures are taken.
The options are:
A Contracting Out Agreement with your new partner under the Property (Relationships) Act 1976. Basically this, by its very name, is a contract. It says “whats yours is yours and whats mine is mine” and if we split you take your property and I keep mine. Its a great tool to a lot of parties. Some pitfalls are, like any contract, two parties need to sign it willingly. The risk is if the other party won’t sign – then what? The answer is – not alot, you can’t make the other party sign it and that can create strains in any relationship. The other question arises – is a full proof? The answer is, usually provided the necessary criteria is met under the Act and there is not substantial injustice to one party. Costs of these agreements can vary from lawyer to lawyer and each party must be seen by independent lawyers. The overall cost can become expensive however, if this is an option for you then, you need to consider it an investment in your future.
The other option is a family trust. The great things about trusts is that on separation whatever property you are left with, is your separate property. By then placing it into a trust keeps it separate. When you enter new relationships, no matter with who or how frequent, the property in the Trust remains trust property which origins are from separate property and protected from Property Relationship claims provided however that no other relationship property is settled into the Trust to confuse the status of the Trust Fund. This can be a great option for those left with substantial assets on breakup however, the one pitfall is it only protects those assets in the Trust and unlike an agreement above, it may not cover the bank account, superannuation or the vintage cars – those assets belong under an agreement. If you are seriously considering this option then who need to be careful of how you manage the Trust. There is evolving case law where non-owning partners have an expectation or made a contribution to the property in the Trust and the Courts have recognized a constructive trust exists and therefore looked to make a settlement on the non-owning partner.
Costs to establish a trust can be substantial and again vary from lawyer to lawyer and only encouraged for those who fundamentally understand the workings of a trust.
Whatever the method, there are protective steps you can take – be rest assured no matter how difficult the break up is – we often end up in new relationships.