When love blossoms later in life…

Throughout life, as two people move towards a more serious relationship, various challenges need to be addressed.  None more so than finances.  Each partner will have their own set of financial circumstances and “baggage” which grow more complicated the older we get.

Common questions and challenges that arise are;

• Impact on Centrelink entitlements.
• The degree to which finances are amalgamated or kept separate.
• Couples with differing financial priorities.
• Couples who enter a relationship with a high level of financial disparity
• How to tax effectively and equitably structure Wills and Estates

Whilst every situation will be different, here are some guidelines for addressing the unique features of financial planning in later life.

1: Involve everyone long before the Will is read

History books are filled with disputes and hurt feelings over Wills that are read leaving the beneficiaries astonished and devastated over the deceased’s final decisions. Don’t wait until it is too late. Financial matters that can have serious impacts on the future lives of your loved ones need to be discussed well in advance with all relevant stakeholders. Preferably before your Will is signed and sealed.

2: Plan for the present with a view to the future

New relationships require new financial arrangements. Below are some examples:

a) When purchasing property consider the estate planning implications

When couples decide to purchase a property, it has immediate consequences for the beneficiaries of the couple following the death of a partner. To purchase “jointly” or as “tenants-in-common” will provide significantly different outcomes.  With the latter, a deceased’s beneficiaries will inherit their appropriate share of the property. Couples may give themselves a “life interest” in the property to allow each to remain living there after their partner’s death. The implication of this for the beneficiaries is that they will only be allowed to receive their inheritance after both partners have died which can create its own issues.

b) Potential Age Pension changes

An age pension payment will change as a consequence of living together. This can occur when one partner is still working and the other is retired and receiving the pension; or both partners have previously been eligible for a single pension.

c) Superannuation beneficiaries need to be reviewed

Superannuation can be used to tax effectively distribute wealth with greater protection and certainty.

3: Design financial agreements suited to the partners’ financial circumstances

A happy relationship is a transparent one, particularly when it comes to money. A good start is to draw up a personal “balance sheet” listing the values of all assets each person owns (eg. property, superannuation, car, bank accounts, etc). All debts and liabilities, such as an outstanding mortgage, personal loans and credit card balances, should also be included.

After both partners are aware of the other’s current financial situation, and if appropriate, a “Binding Financial Agreement” could be considered. This is a legal document that sets out how their property and assets would be divided were they to separate. This is particularly appropriate when there is a high level of financial disparity between partners.

It is recommended to discuss these matters with an estate planning lawyer and your financial planner sooner rather than later.

Planning and preparing financially should by no means lessen the excitement of a new love experience, but when addressed properly will allow the newly formed relationship to be a source of growth for the couple and their loved ones, in the present, and into the future.