We like to think that we’re wiser the second time around. After separation or divorce, we tell ourselves we’ll walk into a new relationship with eyes wide open. The fact that second marriages end in divorce far more frequently than first-timers tells us this isn’t necessarily so.
We’ve worked with countless people trying to sort through their financial affairs after a relationship broke down. We’ve learnt some things along the way. If you’re beginning a new relationship after separation, here are some things you either need to do or keep in mind.
6 things to consider when embarking on a new relationship
1. Have an honest conversation. People embarking on a new relationship often bring with them established careers and maybe a variety of assets. It’s important that you have an honest conversation with your new partner about finances. How will you each contribute to this new relationship? Will you share a budget or contribute individually? How will it be divvied up?
2. Think about home ownership. A home will be, in all likelihood, the single largest asset in anyone’s portfolio. How will you approach home ownership in this new relationship? Will it be joint? Will it be tenants in common?
3. Stat decs mean nothing. At some point in separation proceedings, a stat dec is likely to make an appearance. At this time, many people are surprised to learn that a stat dec isn’t a legally binding agreement, isn’t even worth the paper it’s printed on. Don’t pin your hopes on one of these documents; don’t make plans based on what they outline. A stat dec is not legally enforceable.
In order for a document to be considered a binding financial agreement, two lawyers must be involved, representing each party. Also make sure you have a financial adviser present so that the agreement works in favour of your financial independence and security.
4. Review your Wills and Estate needs. When entering into a new relationship, it’s vital that you review how your assets will be dispersed upon your death. For instance, your current will might bequeath your house to your children. When you die, that may leave your partner with nowhere to live. You need to understand the broader implications of your will and estate upon your loved ones when you die.
5. Understand your superannuation. Make sure you have the correct beneficiaries in place. Something we always make sure our clients understand is that super is taxed upon your death, and not having the right beneficiaries attached to that fund creates major issues.
Super is also key to your retirement plans, so we need to make sure it’s set up for you and your post-work years. Super isn’t a joint asset; it’s your asset.
6. Understand your personal insurances. This could be about acquiring some joint assets or protecting what are yours as well as your lifestyle. Do new beneficiaries need to be added to policies, or certain beneficiaries removed? Will some insurance policies have lapsed upon the dissolution of your previous relationship? Are you sharing new financial responsibilities with your partner? If so, review your income protection to make sure it provides adequate cover.
Retirement is more expensive than ever
The figures above are meant to illustrate how expensive a comfortable retirement is today. Even a modest retirement lifestyle can hardly be funded by the Age Pension. Government benefits simply haven’t kept pace with the cost of living.
This is a clear demonstration of the importance of making sure your super, assets and insurance have all been set up to secure the future you want.
Don’t wait; make sure you’re protected now
Consulting a family lawyer and a financial adviser is the best way to do this, and it really should be done before you embark on a new relationship or as early as possible once it has begun. Delaying only puts your financial security at risk.
You can speak with us individually or with your new partner. It doesn’t really matter. We’re here to help you set up your assets so that they work for you and protect the ones you love.