5 Ways to Protect Your Assets in a Divorce
If you’ve built up a wealth of assets during your lifetime, chances are that once married, they will all become pooled with the matrimonial property. This includes assets you acquired before getting married.
According to the Australian Bureau of Statistics, the median age at first marriage for men was 29.6 years and 27.9 years for women in 2010, an increase of more than three years since 1990 (26.5 years and 24.3 years respectively).
So with more people getting married later in life, the need to preserve assets acquired before the marriage is becoming more significant than ever.
Here are five helpful tips on how to protect your assets in the event of a marriage breakdown and divorce.
A prenuptial agreement
It sounds like something from a US sitcom, but a prenuptial agreement – or financial agreement as it is referred to under the Family Law Act 1975 – can go a long way in helping to preserve your assets if your marriage breaks down.
A financial agreement needs to be in writing and signed by both parties to be effective. What’s more, it can be entered into before, during or even after the marriage ends – so it’s never too late to have one.
So what kind of things can be protected by a financial agreement?
A financial agreement can include an agreement as to how the parties will deal with the property and financial resources acquired before, during or after the marriage.
The best thing about a financial agreement is that you can specify which property is subject to the agreement – like that investment unit you bought 20 years ago.
A family trust
These days, it’s not uncommon to buy property with relatives, such as your parents. With property prices increasing Australia-wide, co-purchasing is a great way to get into the property market sooner. But when you get married, another name joins the title – even if it’s not physically on there – and that is the name of your spouse.
If the marriage does break down, then whatever share you own in the property would be divided between you and your spouse as the court decides – generally in equal shares.
So how do you prevent this from happening – after all, you probably hadn’t even met your partner when you made this purchase, otherwise you would likely have purchased with them.
The answer is a family trust arrangement.
A family trust deed creates a separate entity that can hold property separate to the marital assets. The beneficiaries of the property are named in the trust deed and all rights pertaining to the property are contained in the deed.
While a trust deed attracts stamp duty and costs to set up – and you may not be able to take advantage of first home buyer benefits – a well-drafted deed could end up saving you thousands by protecting your assets.
A company
A company is recognised as a separate legal person under the law and can hold assets and even sue and be sued in its own name.
A company can be a great vessel to acquire and hold property, particularly as tax rules are different for companies compared to individuals.
You can be a sole director/shareholder, or elect to hold the company shares with others. Whoever holds shares can effectively vote on the distribution of the company’s assets. A shareholders agreement can be invaluable to asserting all shareholders’ rights.
There are precautions you need to take and courts are able to effectively “pierce the corporate veil” and uncover assets where the arrangement is a sham, so it helps to speak with a lawyer to ensure your company affords the best protection possible.
Superannuation
Superannuation investments are a great way to lock away your assets until retirement – although the catch is that you won’t be able to enjoy them until that time comes.
You can now acquire property using a self-managed superannuation fund, and this might be something worth discussing with your lawyer or financial adviser.
Get rid of it
The stark reality is that creditors can’t seize assets that you no longer own. So if you’re faced with a marriage breakdown and are about to lose half of what you’ve worked your life for – consider going on a round-the-world holiday trip. It may not be an option for everyone, but it’s an option nonetheless!
At Amicus Lawyers, we can help you to implement a strategy to ensure that your assets are protected, whatever may happen down the track. Contact us today.