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Living together before marriage – or indefinitely – is the new black. The latest AMP.NATSEM Income & Wealth report, Modern Family, found nearly 80 per cent of couples live together before marriage^.
Over the past two decades marriage rates have been declining and de facto relationships before marriage have been steadily increasing. In the past decade alone the number of people living together before marriage has jumped from 72 per cent to 78 per cent.
Regardless of whether people plan to get married ‘at some point’ – or not at all – when ‘I’ becomes ‘we’ and the conversation turns to moving in together, there are many things to consider. The law treats de facto relationships the same as marriage so a lot could be at stake if things don’t work out.
Here are three questions to ask yourself and your partner before taking the de facto plunge.
What happens if we separate?
It’s important to understand that after about two years, what’s ‘mine’ usually becomes ‘ours’. In the event of a separation a judge could rule on who gets what, if you can’t decide between yourselves.
The expense of legal action can be so hefty that ‘ours’ quickly become ‘theirs’ (that is, the lawyers!). So as difficult as it may be to have a conversation with your partner about how you would divide your assets in the unlikely event of a separation, it could help avoid an emotional and very expensive financial tug-of-war down the track.
Make a time to chat and set the scene along these lines: “Before we move in together, we need to talk about what would happen if, by some rare chance, things don’t work out between us.”
Some people find it easier to have such a conversation with a financial planner present to facilitate the discussion. A financial planner can often put things on the table that you might not have considered and is also skilled at working with couples and making sure both parties are on the same page.
You can consider formalising things with a legally binding financial agreement, similar to a pre-nuptial but designed specifically for de factos. Remember though, that if you end up having children together, these agreements can be rendered worthless as the Family Court has the power to override them.
Do you have any debt?
Hidden debt is a common relationship issue. You need to dig deep to discover if your partner has debt before you move in together. If things don’t work out and you’ve lived together for a few years, ‘their debt’ becomes your debt too – and you’ll be responsible for it.
It’s worth asking your partner outright if they have any debts – and if so, what their plan is for repaying those debts. It can be useful to discuss what their parents were like with money as history tends to repeat.
How do you see it working day-to-day?
It’s important to be clear about how you’ll handle day-to-day money issues. How you are going to divide household bills and will you combine your finances or keep your money separate? Being open and honest is key. What system would be fair – both now and down the track. For example, if you’re talking of having kids at some stage, what would happen when one of you is home with the baby? Would you expect your partner to return to work or that she or he would stay home while you bring home the bacon?
Whatever you decide, after tackling these questions, remember good communication is key to a successful relationship. Don’t dance around, be direct and find out what you’re getting yourself into before you start packing those boxes and calling a removalist.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.
^Source: AMP.NATSEM Income and Wealth Report, “Modern Family”, October 2013
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