A reader wonders how a potential relationship might impact on his children’s future financial security.
QUESTION:
My wife passed away some time ago and my children have all left home. I am contemplating a lonely future.
I could get out and start dating but I fear a de facto relationship might impact on my assets and my children’s inheritance. I have a reasonable amount of super and I own my home. I want to provide for my children after my death.
I am aware other people in my situation choose to stay single or keep their relationships at arm’s length.
Others choose not to have relationships at all. Some use the internet to establish relationships just for sex, no strings attached.
What are the legal implications of the different types of relationships and the potential risks I need to consider, in order to best preserve my assets for retirement and for my children?
ANSWER:
Concern about legal and financial risks should not stop you leading your life the way you want.
If a relationship develops to the point where you are living together, you have two years before your partner can be regarded as a de facto spouse for property settlement purposes. During that time you can discuss your concerns with them and if appropriate, both of you can obtain independent legal advice about your rights and obligations.
A relationship is a de facto marriage where a couple has lived together for two years or more, or if they have a child together. Either way, the rights of a de facto spouse are similar to those of a husband and wife.
The Family Law Act provides for the division of property based on the financial and non-financial contributions to the assets of the relationship and takes into account a large number of other factors, which generally relate to the future needs of each party.
Subject to any particular need arising from perhaps, illness or unemployment, contributions in a short relationship are likely to reflect what each of you bring into the relationship. A de facto spouse is not automatically entitled to 50 per cent of the wealth of their partner. Over time their potential claim will usually grow, reflecting continuing contributions.
If a partner moves into your home in some circumstances, even under two years, they may still be entitled to make a claim if they spend money or put in a lot of work to renovate or repair your home. That type of potential claim simply means neither of you should rush into things during that period.
You could ask a potential partner to enter into a Financial Agreement with you. Like a prenuptial contract, this would set out what is to happen to the assets and liabilities of each of you in the event of a breakdown of your relationship. These contracts can be legally binding, but they are complex and there are some risks associated with them.
You are entitled to make a will that benefits your children, but it could be challenged by a de facto spouse if they feel greater provision should have been made for them.
To better protect your estate your wealth may be placed in a Trust. You can pass control of the Trust to your children, without that wealth forming part of your estate in the event of your death. This is a complex matter and can be expensive. Speak with a lawyer who practices in Trust Law.
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