Rules of engagement
Going through the relationship property chores before shacking up is wise if not romantic, writes Susan Edmunds.
The daffodils are blooming, the lambs are frolicking, we are even starting to get a decent dose of sunshine some days. If it looks like your spring fling could turn into something more serious this summer, there are some things you need to know before you shack up with your partner.
It may not be romantic, but if you can work through some of this financial checklist before you set up house together, it should make for smoother sailing.
Debts and assets
One of the most important things to consider if you’re getting serious is what sort of debts and assets you and your partner is each bringing to the relationship.
After you have been living together for three years pretty much everything becomes ‘‘relationship property’’ and could potentially be divided evenly if you split.
That not only means assets such as the house that one of you owned previously and you now live in together, but also any debts.
If you don’t want to risk getting lumbered with half a massive credit card debt you never knew about, make sure you and your partner each lay out exactly what your financial position is. What do you own, what do you owe and what do you aspire to do with your money?
If there are things that you want to keep separate in future, draw up a legal agreement as soon as possible. This is important if you want to protect assets for your kids.
If there are things that you want to keep separate in future, draw up a legal agreement as soon as possible. This is important if you want to protect assets for your kids.
Business interests
It could come as a surprise that a business can also count as ‘‘relationship property’’.
After three years, shares in a business go in the same pot as things like the house if there is no clear agreement in place.
But there may be a tax benefit to having a new partner get involved with a business. If one person earns less than the other, it may be possible for the business to employ them to do part-time tasks, for example, and pay them for their efforts – potentially reducing the income and tax bill of the higher earner.
Get some good accounting advice if you are considering this.
Family discounts
It is worth assessing things such as your insurances, to see if you can get a better deal as a co-habiting couple. Many insurers offer discounts to people who have more than one car insured with them.
Income protection
If you have recently become a two-person household, you will need to think about what that would mean if you were out of work.
If you have to stop work due to illness but your partner earns $30,000 a year or more, you will not qualify for a benefit.
This might mean you need to start thinking about getting some income protection insurance to cover you.
Working for Families
If you’ve been receiving Working for Families as a single parent, you will need to get your household income reassessed now you are a couple, to make sure that you are not receiving more in tax credits than you should.
This will avoid a nasty surprise at the end of the year when you get a bill to pay it back.
The same goes for any other assistance you are receiving from Work and Income, whether that’s sole parent support or an accommodation supplement.
You will need to inform them of your change in relationship status.
Work and Income says it considers people in a relationship if they do things like live together or even stay overnight together a lot, socialise together, share money and bills or give each other significant support.