How To Protect Your Assets During A Breakup

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How To Protect Your Assets During A Breakup

Last year there were almost 50,000 divorces granted in Australia, sadly making it one of the most common issues Australian families must deal with.

Often when people think of divorce they empathise with the emotional impact this has on an individual. What is often forgotten about is the major financial implication it has on both parties, especially if there are assets such as investment properties involved.

A separation doesn’t need to be between a husband and wife for it to wreak havoc on finances. In Australia, if a couple have been living together for more than two years, they are considered ‘de facto’ and their assets are treated the same as married couples if they break up.

Zaki Ameer, Real Estate Expert and Founder of Dream Design Property (DDP) says, “Unfortunately most people don’t understand the seriousness of relationships when it comes to assets. Losing significant amounts of money doesn’t only happen during divorces, it can happen to any couples who have been living together. For example, if a relationship goes sour between two people who have been renting together for more than two years, both individuals are entitled to receive a percentage of their ex’s assets, whether they were purchased before or during their relationship.”

To avoid a breakup leading to bankruptcy, Zaki shares his expert advice on how to protect assets before a separation occurs:

Know where you stand

People are often confused about the difference between a de facto relationship and a marriage when it comes to dividing investments. It’s actually very simple. If a couple is considered de facto, their financial matters are determined in the same way as married couples. Aside from living together for two years or more, a partnership is also classified as de facto if there is a child from the relationship, or if they have registered it under a prescribed law of a State or Territory. So if a person separates while in a de facto relationship, from a legal and assets perspective, they should be prepared to be treated as if they were married.

Don’t make it personal

From the start of any relationship it’s important to discuss assets and money, whilst keeping emotions at bay. Being open and honest about finances from the get-go means awkward conversations can be avoided down the track, and both individuals are aware of each other’s investments.

Be a pessimist

It’s impossible to predict the future of a relationship, so it’s crucial that a plan be put in place in the unfortunate case of a break up occurring. It may not sound like the most romantic option, but having a written contract that details who owns what assets going into the relationship, before being classed as ‘de facto’, is essential to ensure neither party loses out financially.

Also, size really doesn’t matter. Whether it’s one property, or dozens, any assets that are in play going into a serious relationship should be included in the written contract.

If a written contract wasn’t in place before a break up occurs, and a separation occurs, Zaki emphasises the importance of:

Be wary on social media

When investment pieces are involved in a separation it’s particularly important to be civil. Often during the settlement period one party decides to push for a higher percentage of assets after they’ve heard that their ex-partner is with someone else, or happier than they are. So, to avoid this from happening it’s a good idea to be conscious of what you’re posting during this time, or even suspend your accounts.

Don’t rush

Breaking up with a partner is an emotional time, and most people want the process over as quickly as possible. However, from an investment and financial perspective, it is important to wait to speak to the experts. Taking time to meet with law and finance professionals before signing over any assets or money ensures everything is above board, and that each person is getting what they’re truly entitled to.

Differentiate emotions from economics

It’s natural for parties to become bitter during breakups. However, when it comes to splitting assets it’s to the financial advantage of both individuals to keep things as amicable as possible. If a settlement can’t be reached between two people, the case is then taken to court which not only leads to expensive legal fees, but is also risky as it eliminates any control over the outcome.

During the settlement stage, put sanity above savings. To avoid going to court, and extending the process, sacrifices will need to be made by both parties.

Don’t be naïve

Many people assume that simply because a person is the monetary breadwinner they are entitled to a higher percentage or all of the assets in question. This isn’t the case. In fact, ‘non-financial’ contributions – such as cooking, cleaning, or driving their partner around – are also considered ‘support’ that allows that person to apply for a portion of the asset.

Zaki adds, “No one ever goes into a relationship expecting that it will turn sour. However, being prepared from a financial perspective ensures that if a separation does happen, the monetary side is black-and-white, and the individual can focus on just dealing with the breakup itself.”​