How to balance financial security and a serious relationship

How can you balance financial security and a serious relationship?

After the honeymoon stage of a new relationship, our heads start to rule our hearts, and questions start to arise. Can I pursue a personal relationship without exposing my personal assets? Am I telling my partner I don’t trust them if I want to protect my finances?

These questions are natural – many of us are concerned about the challenges of intermingling our finances with new partners.

After all, it’s not just your personal assets that could be at stake if a relationship breaks down. You may need to use a family lawyer to settle property claims, and your children’s inheritance can even be at stake. When you have significant assets, a relationship breakdown doesn’t just mean emotional hurt – it can mean a protracted battle in the courts to settle property disputes.

No matter where you are in a relationship, protecting your finances and family is important.

Thinking about this isn’t hurtful – it’s practical, and a common concern in family and defacto law. 2016 data from the Australian Bureau of Statistics shows there are nearly 50,000 divorces every year – having clarity about separation of assets can make this easier. This is where a Binding Financial Agreement (pre-nuptial agreement) can prove invaluable.

What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a document that can be entered with a partner prior to a relationship, during the relationship or after separation.

You can only enter a BFA when both parties have sought independent legal advice and consent to the signing of it.

What is the purpose of a BFA?

Essentially, a BFA helps to specify exactly how assets are handled by each partner, and can protect both parties from costly litigation in the Family Court after a relationship breakdown.

What are the benefits of a Binding Financial Agreement?

One of the main advantages of a BFA is that it can allow you and your partner to stipulate in writing what you believe is an equitable division of your assets and resources when your relationship is harmonious

A BFA is the only way to contract out certain rights and entitlements under the Family Law Act 1975.

Binding Financial Agreement case study: David and Rachel

David has a new partner, Rachael. David is divorced and has a young daughter to his first wife. David owns 4 properties, a share portfolio and significant investments in a self-managed super fund.

Rachel, David’s partner has a child from a previous marriage. Rachael owns her own property outright, several hundred thousand dollars built up in a superannuation fund and operates her own business.

David is concerned that his daughter’s inheritance may be diminished or lost if his relationship with Rachael breaks down.

If David and Rachel were to separate, both are at risk of losing what they had worked so hard to achieve in life. They may even find themselves before the Family Court.

However, there is a way that David and Rachel may be able to protect their assets and remain happy, without fear of losing everything – a BFA.

By entering a BFA, David and Rachel can outline what happens to each of their assets should the relationship end. Even if they have already combined some of their finances, a BFA can help to identify what happens down the line.

Now remove the names David and Rachel. This could be anyone – which means you should consider a BFA if you are entering a long-term relationship. A Binding Financial Agreement does not take long, and can protect both parties financial future.

If you want to find out more about how a BFA works, contact us at Turnbull Hill Lawyers.