Blended families, where both partners have children and assets from prior relationships, face unique challenges. Each party typically wishes to preserve their individual assets to pass them on to their biological children, rather than having them divided between the new partner or stepchildren in the event of a separation.
A Financial Agreement can be invaluable in such situations because:
- It ensures clarity regarding how each party’s assets are to be managed during the relationship.
- It sets out how assets will be divided in the event of separation, therefore protecting inheritances and other significant assets from becoming part of the matrimonial pool.
In blended families, children from previous relationships often feel insecure about their inheritance, particularly if their parent remarries or forms a new partnership. A common complaint from adult children is: “We always kept our assets separate,” only to find out after a separation that verbal agreements are not enforceable in the Family Court.
In the absence of a Financial Agreement:
- All assets, even those the couple intended to keep separate, can become part of the pool of assets to be divided upon separation.
- Family trusts and loan agreements can be pierced, meaning that even trust-held or loaned assets may be subject to division.
- Inherited assets are not automatically protected and may be included in the division of property.
The only true protection in this scenario is a Financial Agreement, which can document the parties’ clear intentions and safeguard assets from becoming part of the divisible pool.
While putting together a Financial Agreement can be a delicate topic, it is a conversation that blended families should have. The discomfort of discussing Financial Arrangements pales in comparison to the potential complications and family disputes that can arise if there is no legal arrangement in place. It is especially important to have these discussions sooner rather than later — waiting until after separation is almost always too late to draft a Financial Agreement.
A well-drafted Financial Agreement, with independent legal advice for both parties, provides significant protection for blended families. It allows each partner to preserve their assets, ensure their wishes are respected, and avoid the costly and emotionally draining disputes that can arise when assets are divided in the Family Court. It may not always satisfy every family member, but it creates certainty and reduces the risk of legal battles in the future.