Dos and Don’ts of Property Investing for Married Couples

Getting married represents one of the biggest and most significant steps that people make in their lives. It’s an enormous change, and even though it mostly brings the good stuff, it’s definitely a challenge of its own. Married couples have to make some difficult decisions, usually at the very beginning of their life together.

One of the most common decisions for a married couple to make is how to take care and protect their investment. Don’t be naive – some things have to be clear from the start and there a lot of things that you should avoid at all cost. Here’s what you be careful about:

DO’Ss

– Even though it’s not a romantic thing to do, a prenuptial or premarital agreement is essential if you want to be clear on which property belongs to just one spouse and is not susceptible to division in case of a divorce or death.

– Next, if there is a property you would like to keep separate from the mutual property, you need to keep a record of it, as well as precise and detailed books. For example, if you got a property as a gift or you inherited it from a relative, you can make it clear that it isn’t something that your spouse can claim.

– In case you want to keep something in your family in case something happens to you or own it as your personal property, you should keep the records of it separately through the whole of your marriage. In no case should you mix it and combine it with the property you share with your spouse because it could get really messy if at a certain point you need to determine what belongs to whom.

– Be aware of the difference between “active” and “passive” increase in the property’s value because it determines if your spouse is entitled to the property, too. It means that sometimes the increase of the property you consider to be solely yours can actually partly belong to the spouse. Active increase (or the right term would be “appreciation”) represents something that you have actually done, so the property could increase its value (for example, you repainted the house). This increase belongs to your spouse, too. On the other hand, passive appreciation is, for instance, an increase in a bank account that you own thanks to the interest or the inflation which resulted in the increase of your property. In this case, the increase belongs solely to you and you only.

– never use your mutual property for purchasing additional nonmarital property – use your existing nonmarital property for that. More precisely, don’t use your spouse’s money to maintain a property that belongs specifically to you. In this case, the borderline between what is only yours and what is a mutual property can be blurred or gone completely.

DON’Ts

– You shouldn’t just freely assume that your business that you owned before the marriage remains solely yours. In case of a divorce, this part can get really tricky. Sometimes legal mediation services in Sydney can help, but sometimes it can be a nightmare. The thing here is that your business can increase its value during your marriage, but it can be open to discussion if your spouse had at least minor and subtle contribution to it. For example, if your spouse took care of the children so that you could improve your business, it can be argued later that the spouse has the right to a certain share. The more obvious contributions by the spouse are bookkeeping instead of you or even entertaining your clients.

– Never use nonmarital funds in order to pay off a debt that was made during the marriage – the funds won’t belong to you anymore.

– It’s not a practical move to open a joint bank account where you would also place your nonmarital funds. Even if the both of you plan to keep the records separate, it could still get messy after some time. There’s no headache if you separate them completely from the very beginning.

– Avoid making deposits of the income that was made during the marriage into your personal, nonmarital account. This, too, can get really unclear and it could easily happen that your personal account is no longer considered to be specifically yours.