COVID-19 may have taken away many of the hardest decisions associated with getting married – venue, catering, guests – but there are still plenty of things to think about before you get married…
Binding Financial Agreement
There is no doubt that asking your intended to sign a Binding Financial Agreement (BFA) or ‘pre-nup’ is not going to be an easy conversation, but in many situations a marriage doesn’t just involve the two people exchanging vows. The protection offered by a good BFA is usually as much for other peoples’ benefit, as it is for the couple.
Putting in writing what will happen to your property if your relationship breaks down is very useful when:
- One partner has children from a previous relationship who need financial protection;
- One partner is in a business partnership with other people; or
- One partner co-owns or works on a family farm or in a family business.
You, your children, business partners and parents will feel much more relaxed about your marriage if they know whatever the outcome of your relationship, that their financial security is not going to be compromised.
There are other situations where you may need a BFA. You can read more about them here.
Loan from mum and dad
The ‘Bank of Mum and Dad’ may have offered to come to your assistance to purchase your new marital home. This assistance can take the form of either a ‘gift’ or a ‘loan’, and you need to be crystal clear about what it is. A loan must be repaid, a gift does not. Make sure you understand what Mum and Dad intend, and put it in writing!
When your parents die, you don’t want to be arguing with your siblings about whether the money was a gift, or if it was a loan that must be paid back to their estate and shared.
Just as important, if your marriage doesn’t work out, you don’t want your parents to lose their money to your ex-spouse.
Marriage changes everything where inheritance is concerned.
First, if you have already made a Will, your marriage cancels it – even if you don’t want it to. The only exception is if your Will has been made ‘in anticipation of your marriage’ and this intention needs to be expressly stated in your Will.
Second, if you don’t make a Will, you can’t be sure your assets will end up where you intended when you die. Most people wrongly think that their assets will ‘just go to their spouse’, or ‘go to their kids’. But this is not the case.
If you don’t have a Will then the laws of ‘intestacy’ apply (i.e. dying without a Will), and the outcomes are different in each State. What happens on your death varies depending on the laws where you live. For example, in South Australia, the first $100,000 plus half of the remaining assets automatically go to your spouse. The balance of the estate is then divided equally between your children. In New South Wales, if you have a spouse and children with that spouse, then your entire estate passes to your spouse. However, if you have a spouse and children from another relationship, then your spouse gets $350,000 plus half of the balance, and the rest is divided among your other children. Making a Will that takes into consideration your changed circumstances is therefore critical.
You should also consider who will make decisions for you if you lose the capacity to make them for yourself, for example, if you are in hospital. You should put in place or update your enduring powers of attorney and advance care directives to reflect your new marital status. This is particularly so if you want your new spouse to be making these decisions.
Further resources on estate planning can be found here.
Superannuation, especially if it contains life insurance, can be a significant part of your estate. Some public funds have automatic life cover in the hundreds of thousands of dollars. Who will inherit the proceeds when you die?
Without a binding death benefit nomination, the trustees of your super fund get to decide who they will give it to. They may decide to give all or some of your death benefits to your spouse, your children, your estate or a financial dependent.
Part of the ‘housekeeping’ you need to do when you get married is to update your binding death benefit nomination to reflect your intentions.
Read more about the importance of putting place a binding death benefit nomination here.
If you have a blended family, a mortgage or other debts, you may wish to consider putting in place a life insurance policy that provides funding to look after your family if something happens to you.
Life insurance can be owned by you, a third party or your superannuation. If it’s owned by you, it will be paid to your estate; if it owned by a third party, it will be paid to that third party; and if it is owned by your superannuation, it will be dealt with in the same way as the rest of your super.
You need to make sure your life insurance will be paid to the right people, and that it’s enough to look after your family when you are gone.
Ownership of assets
You and your new spouse may wish to acquire assets together. There is nothing wrong with owning property jointly, but you may wish to pause and consider whether it is the most tax efficient or protective way to own your assets.
For example, if your new spouse owns and operates their own business, you may wish to protect your financial interests from the risk of third-party claims made against your spouse, such as claims made by a trustee in bankruptcy, creditors, injured employees or disgruntled clients.
Further, depending on your situation, there may be asset protection options and tax efficiencies to be gained from owning assets in trusts. For more about owning property in trusts read this.
How we can help
As part of your marriage planning, give us a call on 1300 654 590 for a no obligation consultation.
We can help you put a solid legal foundation under your new relationships.
The information contained in this post is current at the date of publishing – 14 April 2020