What you can do to protect your family assets in the event of a relationship breakdown
When a relationship falters, people can often be caught off guard and unable to think rationally due to the associated emotional pressures and burdens at the time of the fallout. It is therefore best to be prepared for the worst case scenario so that you do not accidentally put yourself into an uncomfortable position.
This article will summarise the various methods and tips people can undertake to protect themselves.
A good way to overcome the above problems is to enter into a Financial Agreement before you enter into a relationship or marriage. The agreement will dictate how the property and financial resources of the parties are to be dealt with in the event of relationship breakdown.
Note that strict formalities must be met. The Agreement has to be in writing and signed by both parties. Each party must have their own independent legal advice and have a certificate provided by each lawyer who gave the advice.
If these requirements are not met the Agreement can be set aside. Other circumstances where the Agreement can be set aside include if:
– The Agreement was obtained through fraud;
– One of the parties’ circumstances has materially changed since the Agreement was made;
– It is unenforceable;
– One of the parties acted unconscionably when the Agreement was made.
– Other reasons: The Court has a wide discretion and changes in the law could create other new scenarios where such Agreements are set aside.
However, even if the Agreement is set aside, it can still prove useful as a record of the parties’ initial financial contributions to the relationship or marriage. Such contributions are important because they determine the parties’ respective contributions to the relationship upon its breakdown and also factors into property settlement considerations.
Because the Family Court has wide powers to look behind family trusts to find that they are actually the property of the parties (and therefore available for distribution between them by way of property settlement), it is best to keep trusts as discrete entities with records of transactions kept. Trust and personal assets should be kept apart.
Records of contributions
Share dividend, superannuation, mortgage and bank statements should be kept. A market appraisal from a local real estate agent should be kept with regards to the value of any property that was brought into the marriage/relationship.
It is also wise to keep a record of where various financial contributions came from (whether they are gifts, inheritances, compensation payouts or non-income sources). For example, if you receive funds under a will or from a gift, you should keep the paperwork.
If this is your second or third marriage, care ought to be taken so that provision for your current spouse is adequate whilst at the same time ensuring that children from prior marriages are taken care of. Therefore testamentary trusts or mutual wills can be provided. Sometimes it could be advantageous to leave assets to your grandchildren.
Loan Agreements and Caveats
If a person’s parents or other family member loan a sum of money to the parties (to help them purchase their first home for example), steps should be taken to protect that loan.
You do not want the other party to claim that the money was a gift at the time of property settlement because this would mean the funds will not be paid back. Hence the person whose parents advanced the loan will then have to shoulder the loan.
To show that it was a loan you might need to demonstrate that the monies were regularly repaid, there was a written agreement and the provision of security. This will be hard to show so it is best instead to have a loan agreement and that the parents arranged for a caveat to be lodged against the parties’ home.
A relationship breakdown can be a very emotional experience for all involved. If you require advice in regard to family assets in the event of a relationship breakdown, the lawyers at The Quinn Group can help you at this difficult time. Call us on 02 9223 9166 or submit an online enquiry.