Edgar Paltzer, Switzerland-based attorney-at-law, advises clients on the legal complexities of wealth structuring services. This article will look at the practicalities of pooling family assets, exploring the risks and advantages involved.
In family law matters, the term ‘asset pool’ refers to the overall net value of a couple’s assets, including financial investments, property, vehicles and personal belongings. Essentially, the asset pool incorporates everything held jointly, as well as all assets held in the individual names of both parties and any items that come under one or both of their control.
In simple terms, the asset pool is the total value of all assets of the relationship. In terms of achieving an equitable property settlement following separation, understanding the full makeup value of the asset pool is crucial.
Merging assets can create significant benefits. Take for example a married couple pooling their resources to place a down payment on their first home. Individually, homeownership may be out of reach, but by joining forces, they are in a stronger financial position.
Traditionally, it was commonplace for married couples to open a joint account and combine their finances. Today, however, things are less black and white. Some couples cohabit without marrying. Some households are blended, with each partner having different financial responsibilities and priorities. While joint accounts offer a practical means of ensuring mortgage payments and utility bills are paid on time, they are not for everyone.
In the case of a joint account, both parties benefit from equal access to funds and can usually make withdrawals without consulting the other. However, should one party have a bad credit rating, this could negatively impact the other. Furthermore, should either party incur overdraft debt, both parties will be jointly responsible, which could potentially cause friction in the relationship.
Turning to the positives, combining finances makes it easier for a couple to track household expenses, enabling them to budget more effectively. In addition, two sets of income are likely to earn more interest than a sole account, with many banks offering additional perks for those who opt for a packaged joint account.
In a relationship, irrespective of whether the couple operates a joint account, one party is typically responsible for managing the finances, including paying all of the bills and serving as a main point of contact for accountants and financial advisors.
Should the couple separate, the party with limited knowledge of the finances will find themselves at a distinct disadvantage when it comes to understanding ownership of the property. This lack of awareness can present significant challenges when it comes to negotiating appropriate property settlement terms and safeguarding the financial future of both parties.
