CG Legal Group - Your Trusted Advisors for Relationship Breakdown Financial Protection in Brisbane and Sydney

Securing Your Financial Future Amidst Relationship Uncertainty: Key Insights

By CG Legal Group – Your Trusted Advisors for Relationship Breakdown Financial Protection in Brisbane and Sydney

In an era where relationship dynamics are ever-evolving, it is increasingly crucial to consider safeguarding your financial well-being in the event of a relationship breakdown. While not the most romantic topic, it is undeniably vital.

According to the Australian Bureau of Statistics, 56,244 couples in Australia went through divorce in 2021, marking a 13.6% increase from the previous year. The stresses of the pandemic may have played a role in this surge, making forward-thinking and pragmatic financial planning all the more essential.

It’s a common scenario: most individuals enter a relationship with assets already in their possession. Yet, many fail to contemplate protecting the wealth they’ve amassed before the union. During the rosy times of a relationship, such thoughts often remain on the backburner. However, it’s imperative to ask yourself objectively: “If this relationship doesn’t work out, what do I want to walk away with?” The solution lies in having a financial arrangement in place. Pre-nuptial agreements are no longer reserved solely for Hollywood stars or the ultra-wealthy.

Even if you’ve already tied the knot, it’s never too late to secure your financial interests. We’ve witnessed a growing trend in clients seeking “post-nuptial agreements” to establish financial arrangements after their relationships have commenced – sometimes, even after years of togetherness.

Embrace Pragmatism: Open Financial Conversations Early

Early in a relationship, it is both crucial and pragmatically unromantic to initiate a conversation about finances. Address questions like: “What financial arrangements should we agree upon if our relationship doesn’t work out?” This foresight can make all the difference.

It’s especially important for women to engage actively in managing household finances. In many cases, women may have entrusted the financial aspects of the household to their spouses while focusing on other vital family and domestic roles. However, when a marriage unravels, this lack of financial understanding can be a significant disadvantage.

We recommend paying close attention to household finances from the start. At the very least, both partners should be aware of joint assets and their shared financial commitments. In any financial discussions, involving trusted advisers such as tax, legal, and financial experts is highly advisable.

Protecting Assets for the Future

For parents who have gifted money to their child and their child’s spouse to aid in purchasing a home or business, it’s prudent to establish a loan arrangement. This precaution ensures that if the relationship sours, the funds can be reclaimed.

Similarly, if you’ve received an inheritance or a substantial gift, it’s wise to safeguard this asset by putting a loan agreement in place when entering a new relationship.

Separated or Divorcing? Prioritize Your Financial Well-being

If you find yourself in the process of divorce or separation, the key is to manage your finances in a way that is accessible and controllable. The conventional “split everything in half” approach may not result in a truly equal or tax-efficient division, depending on how assets are held.

In this situation, it’s vital to be clear about your financial goals, whether it’s maintaining your lifestyle, ensuring long-term security, or pursuing other objectives. Losing half of the household’s income can impact your lifestyle, but expenses may not decrease, especially if children are involved.

Understanding your future expenses and taking steps to gain control is paramount. Consider the example of a client whose ex-husband offered to cover their child’s school fees for high school upfront. However, she chose to receive the funds in her name, allowing her to invest wisely and make decisions that offered more financial flexibility.

Accessible and Controllable Assets Matter

When it comes to assets like the family home and superannuation, accessibility and control are crucial. While you might be awarded the family home or superannuation, you may not be able to access them until age 65. Therefore, it’s essential to have non-preserved assets outside of super that you can access for living expenses.

Many clients express a strong desire to retain the family home, but it’s essential to move past sentimental attachment and determine a pragmatic asset split that ensures manageable cash flow and liquid assets.

In the emotionally charged atmosphere of divorce, avoid protracted financial settlements in court. Instead, pursue pragmatic, logical ways to divide assets efficiently.

In conclusion, they say love is blind, but it’s essential not to be blind to the risks of not protecting yourself financially in the face of relationship uncertainties.

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