Even if you have been very sensible with your money, most women at some point or another have been affected by poor financial decisions made by their partner. In the worst situations, women can become liable for their partner’s financial debts.
The highest rate of increase in homelessness and poverty in Australia today is being experienced by women over 55 years of age. Knowing how to protect and maximise your assets is key to not being part of these statistics.
Women face specific issues in relation to the law, however until recently there wasn’t a free resource available in Australia to help women understand the law as it applies to key areas of their lives including health, work, family breakdowns, money and growing older.
Recognising this important need, Catherine Henry Lawyers developed Women and the Law: A guide to help women navigate the legal system. Created by women, for women, it looks at the issues and provides information and tips for women to protect themselves as well as seek justice or compensation. The following is an extract from the chapter Women, Money and the Law, published here with full permission.
[perfectpullquote align="full"] Even if you have been very sensible with your money, most women at some point or another have been affected by poor financial decisions made by their partner. In the worst situations, women can become liable for their partner’s financial debts. We call this a Sexually Transmitted Debt (an STD). [/perfectpullquote]
STDs, depending on the details of each situation, can actually require you to repay debts of your current or former partner, even if you do not have the benefit of the money or the asset that was associated with the debt.
Here are three of the best ways to avoid STDs.
1. Ensure you understand the significance of providing a financial guarantee
A guarantee is a legally binding agreement to another party (usually a bank) which commits you to repaying someone else’s debt (often your partner’s debt). That means that if for whatever reason your partner cannot or does not repay that debt, the bank may come to you and require you to repay the debt. It doesn’t matter if you never saw the money or you never used the asset, if you signed the guarantee, then you are probably liable for your partner’s debts.There may be some exceptions but it is more common that you will remain liable for the debt.
2. Ensure you understand your duties as a company director and take them seriously
If you happen to be a director of a company with your partner, or perhaps you are also a trustee of your SMSF with your partner, then you have duties to that company or trust. That means that you must understand what your duties are, because you may be liable for anything the company or trust does or should have done. It is not an excuse to say that you didn’t know what you were signing.
3. Take legal advice before signing anything financial which is related to your partner or their business
If you are concerned about asset protection, then you should consider speaking with a lawyer about how best to ‘structure’ your wealth and your partner’s wealth. In many cases, it may be that only one of you holds risky positions (e.g.as a director or trustee) and that the other one of you holds key assets. If this situation is suitable for your circumstances, it means that you should probably not guarantee loans of your partner, and that you should probably not be a director or a trustee.