Asset Protection- protecting your business and assets from claims by your spouse

Hello everyone,

At the end of a relationship if you can not agree The Family Court will divide all of the property and superannuation that you and your partner have, irrespective of whether it is in your name or in joint names. Even if your assets are held in a company or trust, if you control that company or trust then those assets are also usually available for division.

Thus all the property, investments and superannuation you have, including your business, even if your spouse has never walked through the door of that business, are at risk.

Fortunately it is fairly simple to protect yourself and your assets from relationship breakdown. Binding Financial Agreements (“BFA”) have been law in Australia for a number of years and if executed properly will protect your assets and business if your relationship breaks down.

The purpose of a BFA is to allow parties to determine when things are going well, what will happen to their assets and financial resources when things go bad. The parties are able to make commercial decisions about their future in much the same way as they make decisions about employment and how they run their business.

With one in three marriages ending in divorce, couples commencing relationships later in life and with de facto and same sex couples now having the same rights as married couples more and more people should consider contracting out of the Family Law Act and signing a BFA.

A BFA is a contract between two people, irrespective of gender, who are living together in a genuine domestic relationship and who want financial certainty.

By signing a BFA the couple knows from the start of the relationship the implications of the financial decisions they make during their relationship. They are taking control rather than taking a risk and ultimately giving the control of what should happen to their assets to a court.

Ideally an agreement should be signed from the moment you start living together. However, if you have been living together or have been married for a while it is still possible and advisable to enter into such an agreement.

These agreements protect your assets and dictate what will happen in the unfortunate even of relationship breakdown. Agreements can be as limited or as detailed as you like. They can last for the entirely of your relationship or for a limited period.

You can agree to exclude just the income and assets you had before you started living together and divide what you earn whilst you are together. Alternatively you can agree that everything you have now or will earn during the relationship is excluded.

You may elect to exclude certain things, like your business but not others, for example you can agree that your partner can have half the house that you live in, but that he or she has no claim to any investments or other property that you acquire. Any inheritance or gift from your family can also be excluded.

There is a perception that signing such an agreement is not romantic. At the beginning of your relationship you might believe that your spouse will do the right thing by you and that you can trust him or her.

At the end of the relationship it is likely that the trust you had has disappeared and been replaced by anger and greed so that your spouse wants you to “pay”. He or she will look to you for money and assets so they can look after themselves in the future.

In simple terms everyone who is considering living together should immediately get advice from a Family Lawyer on the advantages and disadvantages of signing a BFA. There is no time limit as to when an agreement can be signed; it can be signed before to after you start living together or in anticipation of or even after your marriage.

You should seriously consider signing such agreements if:-

• you have significant assets or significantly more than your partner;
• you wish to preserve the your business, company or family trust;
• you wish to preserve assets for your children of previous relationships:or
• you expect a significant inheritances that you wish to preserve.

If your partner is not willing to sign such an agreement then maybe you should question what they expect from you financially. Of course if the relationship stands the test of time then such an agreement will be unnecessary, but why take the risk?

You do not question it when it is suggested you get investment or tax advice. You should also consider getting Family Law advice and controlling your assets in the event your relationship breaks down. Otherwise you are giving away control of your assets and financial resources to a court to decide for you.

As always please feel free to comment on this or any other of my blogs. I would also be happy to respond to any questions you may have on this topic. If you have any further queries please feel free to contact me directly at Septimus Jones & Lee on +61 3 9613 6555