Asset protection by way of a binding financial agreement
Congratulations you have just announced your engagement. You are a young executive in a large company deriving a substantial annual income. You have developed a portfolio of assets including shares and real estate.
Your fiancé is on the other hand less affluent but that is immaterial as you are clearly in love. In the circumstances you choose to ignore the family’s concern and suggestions that you should consider the possibility that lust will wear thin and in time the relationship may even falter.
Love conquers all and you cannot conceive of the marriage breaking down irretrievably and the subsequent divorce with a property division. No, you insist that you will experience the idyllic marriage. You will not need to work in the new married bliss and you will enjoy the party life, with a nanny to cater to the children and a house keeper to tend the domestic chores.
Wedded bliss turns sour
Wake up girl. Your marriage is now dead. Fast forward in your thoughts to the family court allocating a percentage of your hard earned income and assets to your husband in a bitterly contested court battle. No, never you say.
How unfair could life be to you?
Well, life can become tough. Rules and regulations will determine the inevitable allocation of property and assignment of the pool of assets and liabilities. Let us examine just precisely and mathematically how the family law legislation will view the asset pool. Go google, familiarize yourself with the workings of the Family Law Act.
Essentially the court considers the two sections of the legislation, s75(2) and s79(4), to evaluate you gets what in the wash up.
How does it now all work?
The first step will be to identify the assets and liabilities and this will include your nest egg of superannuation entitlements.
The second step will be to look at the contributions, financial and non financial, that each of you has made to the acquisition, maintenance and improvement of these assets. Included in this accountancy exercise will be those assets which may have been disposed of over the years.
You argue the point. In your view your pre marital portfolio may well be quarantined as you all know that he made no financial contribution to the purchase of these properties. Wait up. Smell the reality of life. You stopped working and had no income to support the mortgages and the outgoings in respect of these assets and so he shouldered the financial burden over the years even though the properties were registered in your name as the owner.
He took over the financial responsibilities and ignored the fact that technically he did not have an interest in these properties. With the passage of time the court will down play the initial contributions of deposit and mortgage payments that you made toward these purchases.
Guess what. Your husband’s financial as well as non financial contributions (you know how he undertook the renovations and the painting to save you money) will kick in and he will suddenly have as many brownie points on the score board as you have in the division of these assets. The court will carve up the asset pool and you will not like this cut.
Think about the future now. Talk to a lawyer who can advise you on asset protection by way of a binding financial agreement (or a pre nup in the old terminology) and how you may oust the jurisdiction of the court and pre determine the property division even before you marry. It is not difficult and the concept will apply to first and subsequent marriages but you will have the peace of mind to work on your marriage.
Disclaimer : This article provides basic information only and is not a substitute for a professional or legal advice. It is prudent to obtain legal advice from a family lawyer.