Protecting your property when starting a new relationship
So, you’re in a new relationship, but you wish to protect your assets in case the relationship goes bust. Contracting Out Agreements (often referred to as pre-nups) are not the most romantic of notions, however they are becoming increasingly more acceptable in new relationships.
Why might I need a Contracting Out Agreement?
If you are either married or have been living with your partner for more than three years and you decide to separate then most of your property will be determined as “relationship property”, unless you have kept it deliberately separate. Under the Property (Relationships) Act 1976 (the Act) your property will then be divided equally between you even if you have made unequal contributions.
Why will my relationship property be divided equally?
The presumption of equal sharing is based on two principles within the Act:
- That men and women have equal status; and
- That all forms of contribution towards a relationship are treated equal.
This means that a financial contribution to the relationship is not considered any more important than the child-minding or housework contribution for example. In lots of cases one party is enabled to go out and generate an income because the other party is looking after their children or because of the emotional support of their partner.
What relationship property do I have?
Often people will comment, “neither of us really has anything”, however here is a list of some of the things that are considered relationship property:
- Properties, whether it’s the family home, the bach or investment properties;
- Any shares in a company;
- Any beneficial interest in a Trust;
- Any chattels;
- Your vehicles;
- Funds in your bank accounts, both in New Zealand and overseas;
- Your KiwiSaver account or any other pension fund; and
- Some life insurance policies where they can be cashed in prior to death.
If you do not have a Contracting Out Agreement which specifies how these assets are to be divided in the event of a separation then you will likely need to instruct a lawyer to draft up a Separation Agreement and the above will be valued and then distributed in equal proportions. There are some exceptions to equal division and what is considered relationship property so it is imperative you instruct a lawyer to help you with this at the time. If you don’t and you just divide things between yourselves then you run the risk of your partner bringing a claim down the track because they no longer feel that the division of your property was fair or equitable. This is why it is better to get things squared away legally in the first place.
By having a Contracting Out Agreement, you can ring-fence items of property as your separate property. This means it is clear when you separate who gets what and anything not ring—fenced will be determined as relationship property.