New rules for couples and financial affairs

Some relationships end far too easily and you could end up with financial loss. Picture: iStock.

Health issues are top of mind during this COVID crisis, but as investors we also need to be on alert for another “virus” – it’s called sexually transmitted debt. It’s hardly new, but as financial affairs become ever more complex, it is becoming increasingly dangerous.

STD occurs when you take on your partner’s debt, either knowingly or unknowingly.

While financial literacy classes may offer some elementary lessons on the bare essentials of money and investing there are other issues that can be exceptionally costly if we don’t get them right.

I can understand why years ago women in particular got into messy situations with their partners. They were often less money aware, and trusted a partner to look after these things.

Often in court cases where couples owed money, the woman might be excused from the debt because she had signed papers unwittingly and may not have been fully aware of her spouse’s borrowings.

But there’s a lot of information now on the internet to make you aware of how infectious someone else’s debt problem can be. Financial institutions will invariably ensure that copies of loan contracts and statements are sent to all parties in any debt situation.

A crucial issue in this area is whether to combine bank accounts. According to a 2018 ME Bank survey of 2000 Australians, 71 per cent of married/de facto couples had a joint bank account. Unless you put in restrictions to a joint account, both parties have complete access to the cash.

The general definition of STD is the debt you become liable for because you’re married or in a de facto relationship. However, here in Australia, you’re not legally responsible for your spouse or partner’s debts unless you knowingly sign a joint loan agreement with your partner or go guarantor for a loan they’ve undertaken or you’re a director of a family company or a partner in a business.

In a worse-case scenario, if your partner ran up gambling debts or had other loans only in their name and didn’t pay them, you’re not legally responsible. But if you had a joint credit card or a joint loan with them, that’s a different story.

Either way trust is crucial when it comes to opening a joint bank account. Joint accounts work, but if you feel uneasy about the longevity of your relationship, then I’d be sure to consider separate accounts.

I’ve heard so many stories about relationships ending and when the aggrieved partner checked their account it had been cleared out. You’re often emotional enough when a relationship ends without adding financial loss to the equation.

I’d be very careful who I have any account with because some relationships end far too easily and you could end up with financial loss. Obviously no one wants to go into a relationship thinking “what’s our plan of attack if this goes belly up”, but breakups and divorce are common.

One of the most important things to do to avoid sexually transmitted debt after a separation is to inform all your providers as soon as possible so that all names are changed on loans or accounts.

While financial agreements such as prenups might seem awkward to discuss, the Money Smart website – produced by the Australian Securities and Investments Commission – recommends having them in place if you want to protect property or superannuation assets.

If you are worried about any of these issues, the Money Smart website recommends that you quickly:

● Close any joint bank accounts.

● Cancel joint credit cards.

● Cancel overdrawn facilities on accounts.

● Remove your name from any agreement, loan or bill.

● Update any insurance policies.

● Update your lease contract (if you rent).

● Update your superannuation – call your super fund to do this because you may have nominated your partner as your nominee to inherit your super if you die.

● Update your will and any powers of attorney.

Maureen Jordan is the chief executive of Tilly Money, which specialises in investment issues for women.

www.tillymoney.com.au