Asset Protection -Entering & Leaving Relationships

 

Asset Protection for Women through Dissolution of a “Relationship” & entering New Relationships

by Diane and Kevin Rainey - Sothertons Accountants - Parnell, Auckland

The Matrimonial Property Act ensures new partners of a relationship or a marriage are entitled to half your assets after 3 years if you do nothing to protect them. It’s that simple, and so is the fact that you are due half of any joint assets from a marriage or relationship which exceeds three years.

It is of great concern that many women departing a long relationship are receiving incorrect advice on how to best divide assets in order to reach an amicable and swift relationship dissolution. What tends to happen is partners often reach some sort of asset distribution between themselves. Then both parties, in order to comply with legal requirements, consult independent lawyers to have the agreement ratified. This is where the process often unravels. Rather than accept what the partners to the relationship have agreed, a new asset distribution list is drawn up and the process starts to languish. In some cases, this has been known to drag out a settlement up to 3 to 4 years, whilst lawyers argue over what are the “joint assets”.

As a woman and a partner to a relationship dissolution, it is your responsibility to understand and decide what is fair and equitable and ensure this takes place.

If your joint assets are only a home, then the matrimonial agreement is straight forward.

On the other hand if there are businesses involved then the matrimonial agreement becomes rather complex.

Consult your accountant first

If you have no idea what the true assets of your relationship are, then consult your family accountant before seeing a lawyer. The accountant will have an up to date idea of your family’s true financial position. Even if the assets are minimal, you can take advice as to your entitlements from the marriage. It is not possible to obtain more than you are entitled to without an enormous battle and the legal fees may erode what little advantage there might be.

If the business affairs are complex it may be wise for you to employ your own accountant.

The hard pill to swallow is that even if you feel bitter, angry or unwilling to proceed out of the relationship there is only one way to go and that is forward into your new situation. It is wiser to spend the money on counselling than legal fees.

It is said that the first offer is often the best. It may not be utterly fair at the time but with a bit of negotiation between you and your partner, especially if he is the one seeking to dissolve the marriage, it is usually to your benefit. Ask other women who have been through a similar situation before you amass thousands of dollars in legal fees and many months and brain space trying to reach a legally inspired settlement.

Newly divorced, widowed or single – what can you do to protect your assets before you form a new relationship?

1. Form a trust in which to place property or assets – bearing in mind that you can only gift a maximum of $27,000.00 per annum into the trust. If the assets are not fully gifted there will be a remaining loan due to you. This will normally be protected; however a former partner might try and dispute it legally.

An important issue is that if your property has a mortgage, make sure you make the mortgage payments yourself. Your new partner might need to pay you rent, but if he/she pays a sum directly towards the mortgage, the mortgage reduction can be deemed to be relationship property on a dissolution.

2. Insist on a relationship property agreement (pre nuptial agreement) – have it drawn up immediately and before a relationship is formed so it is always there for you to call on. Be warned this will often lead to a breakup of the relationship.

If you don’t create an agreement straight away then at least do it 2 years into the relationship. If the relationship goes past 3 years it is too late and likely all individual assets will become relationship assets.

What happens with inheritances?

Should you receive an inheritance, providing it remains in the inherited form and not transferred into your joint relationship property, it remains as your separate property.

The above is not intended to replace sound legal advice but provide each of you with a small background to relationships and some effects of their breakup.

Should you find yourself in this situation and require some direction or independent advice, feel free to contact Diane or Kevin Rainey at Sothertons Limited, Chartered Accountants.

Contact Diane or Kevin any time and we look forward to helping you.
Phone 64 9 303 4218
Fax 64 9 303 4219
E-mail diane@sothertonsak.co.nz
www.sothertonsak.co.nz

Sothertons - An association of independent accounting firms throughout Australasia