Binding financial agreements
The commonly known way of asset protection is through binding financial agreement.
However, the protection offered by a binding financial agreement is usually unreliable, insufficient, and does not create certainty.
A lot of people neglect, or do not realise, that the preparation of a will is the cheapest and most effective way to protect assets from their spouses/partners. This is because, without a will, a person’s assets will automatically pass to his/her spouse/partner on his/her passing.
The existence of debts and liabilities
Family law property division is applied to the net value of the parties’ matrimonial asset pool. Where a party has, for example, borrowed monies from family or friends, the usual rule is to deduct the value of these debts and liabilities from the asset pool.
However, the difficulties faced by most parties are that they cannot prove, or sufficient prove, the existence of such debts and liabilities. This inability comes from the lack of agreements, records, and importantly, evidence of repayments.
Settling a trust may be capable of achieving asset protection, although the family law regimes has its own specific requirements in relation to how the trustee manages the trust assets.
The usual family trust system adopted by most Australians are not, in our experience, sufficient in achieving family law asset protection against property division.