Couples might be open to sharing all sorts of things, but with finances there’s a little more to think about.
If you’re in a relationship, you and your partner may share a variety of things: grocery shopping, household chores and, most importantly of all, the TV remote. But what about your finances? There are many reasons why you and your partner may choose to have joint couple or marriage finances: you may want to split bills and utilities, save for a car or holiday together, or buy your first home.
To make the best decision for your financial situation and minimise any potential conflicts in the future, it can be beneficial to have discussions on how you and your partner will manage purchases and costs. In addition, if you’re planning to share your money, it may also help to be aware of the advantages and risks of merging your finances, both individually and as a couple.
Before you consider merging finances or making any big purchases together, consider having an open and honest conversation with your partner on important things such as:
Sharing finances comes with a range of benefits, and can be a good option for couples who spend money in a similar way, communicate openly and effectively about financial matters, and who trust each other. By joining your finances, you could have:
Joining finances has its advantages, but there are also potential issues that can arise, regardless of whether you’re spending together, saving together or investing together. Issues can arise when:
By merging your finances, you are also merging your responsibilities, risks and any consequences that arise. Before making any financial commitments together, it can also help to consider:
It may be beneficial for you and your partner to discuss different issues and scenarios, and agree on some ground rules up front. This could help prevent any misunderstandings or arguments in future.
Buying a home is a big step in a relationship. A mortgage is likely to be the biggest debt you and your partner will take on together, and home loans are typically a long-term debt (the most common home loan terms in Australia are 25 and 30 years2). There are a few considerations that you may wish to take into account before committing to purchase a property together.
A co-purchase agreement is a legally binding document that outlines each person’s rights and responsibilities, including how mortgage repayments will be divided, as well as how disputes will be resolved if the relationship ends or someone fails to make repayments. While it can be unpleasant to think about, it can help to put things into writing, just in case the unexpected happens.
Most home loans have a joint or several liability clause that could affect your repayments and your future financial situation. Joint and several liability means that you’re both jointly responsible for each other’s debts, so if your partner can’t make payments, the bank can seek this money from you. To protect both you and your partner in this case, consider addressing this in your co-purchase agreement, and ask what your lender can do to limit your liability as a co-borrower.
When you buy a home together, there are two types of shared ownership that you can choose from: joint tenancy, and tenants in common.
Many married couples choose joint tenancy because of the rights of survivorship, where if one passes away, the property ownership is automatically transferred to the surviving spouse. A tenant in common arrangement, however, can make it easier to divide and sell your share of the title, which could be helpful if the relationship breaks down.
If you do happen to split from your partner (whether you’re married or in a de facto relationship), you may need to arrange how ‘property of the relationship’ (your assets and debts) will be divided, regardless of whether you hold them separately or together.
This can be formalised between the two of you without court involvement if you can reach an agreement.3 If you can’t agree, you can apply to a court for financial orders regarding the division of your property and superannuation, as well as any spouse maintenance that may be payable.4 Applying to the court typically needs to be done within two years of you splitting from your former partner, otherwise you’ll need to have special approval from the court to proceed with your application.5
With all this in mind, if you’re concerned about who might get what, you may want to think about entering into a binding financial agreement (also known as a pre-nuptial agreement) with your partner before you get married, or if you are in a de facto relationship.
If you would like to make an appointment to see a financial adviser don’t hesitate to contact the office on tel |PHONE| to make a time or alternatively book online using our appt link here – simply choose an adviser and select the most suitable day and time for your appointment.
1 Australia’s hidden spending: The country’s $11 billion dirty secret
2 Finder – How long should my home loan be? paragraph 6
3, 4, 5 Family Court of Australia – property and finances after separation
Source: AMP
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