You’ve been dating for some time and have made the decision to move in together, but amidst romantic bliss, when is it the right time to talk about being financially exposed?
It might not be a comfortable candlelit dinner conversation, but the talk about financial risks of being a de facto couple shouldn’t be an emotional tête-à-tête, according to Director of the Westpac Massey Fin-Ed Centre, Pushpa Wood.
Becoming financially at risk in a relationship also shouldn’t be undertaken as a sign of commitment, Wood says.
“De facto relationships and marriages are not lifelong commitments anymore so you still have to survive and thrive after a break up. If you’re coming into a relationship at a mature age, it also can financially effect your children so you need to think about protecting everyone involved,” Wood said.
Once a couple has been living together for three years in New Zealand, they are subject to the Property (Relationships) Act and equal sharing of other assets. It is very easy for de facto couples to find themselves subject to the provisions of the 1976 Act without realising it, Auckland lawyer Jennie Hawker says.
“Whether you’ve been together for three months or three years, if you have assets to protect you should talk about an agreement. Equally, those who have a need to protect assets during a longer relationship (such as with a sudden substantial inheritance) can still sign an agreement at any stage,” Hawker added.
Woods advises couples not to think of this as an emotional discussion.
“I especially encourage women to go into financial situations with their eyes and ears wide open before making an emotional decision. It shouldn’t be emotional decision, it should be seen objectively as a financial risk.”
Even if both parties in the couple earn similar salaries and do not yet have any valuable assets, the risks to be considered are how each of you individually handle money.
If couples decide to open a joint account before the de facto three year mark, the risks should also be considered, such as looking at the motivation behind the decision, Pushpa recommends.
“Is a joint account to make life easier, such as to pay utility bills and rent, or is it a deeper emotional issue like to show you’re committed to the relationship,” she asks.
“Always understand what the risks are. If one person is more responsible with money than the other, then you need to look at the risk that the irresponsible person might spend too much. They might not realise that a discussion needs to be had before buying a big ticket item or taking out an overdraft.
"Especially if you are in the habit of operating as an individual and then you’re in a place where it’s a joint decision and you’re making individual decisions. This doesn’t mean that it doesn’t work but you need boundaries and guidelines,” Woods added, who is a strong believer in prenuptial agreements.
“I’ve seen so many cases where men and women have been taken advantage of. Look at safeguarding what you have and what you’re building together,” she said.
Jennie Hawker, who is a Partner at Wynyard Wood Lawyers & Notaries, encourages couples to have the conversation, even if they don’t want a prenuptial agreement.
“If the couple is younger and want to accumulate assets together they may decide not to bother with an agreement, even if one earns more than the other. Everyone has a different view as to what should happen to their property and this is why no two agreements will be the same,” she said.