If you think ‘keeping it separate, keeps it safe’, or ‘what’s mine is mine and yours is yours’ is enough then you are mistaken. Whether you are married, in a civil union or a de facto relationship the Property (Relationships) Act 1976 (“the Act”) makes the rules and the starting point is equal division. The family home (where you live) and chattels (boats, cars, furniture, caravan, household items etc) are automatically deemed relationship property regardless of who or when they were introduced to the relationship. All other assets (land, income, KiwiSaver, business interests etc) and (in most cases), liabilities (mortgages, third party loans, student loans etc), will also be considered relationship property and therefore divided equally when the relationship ends, whether by separation or death. This can mean that, ‘what’s mine’ might not just be mine; it might also be ‘yours; and ‘what’s yours’ might also be ‘mine’. For some, this might not matter. If you have no particular need to ‘ringfence’ any assets or liabilities as belonging to one party or the other going forward, then relax and let the Act be your guide.
For others, a contracting out agreement (also known as “a prenup”, or “section 21 agreement”) may be important where one party brings more to the relationship than the other or if there is a second or later life relationship where the absence of an agreement could result in unintended and unjust entitlement to an estate that may have been intended for children of an earlier relationship.
Unfortunately, a home drawn up agreement or mutual understanding, just won’t cut it. For those who may need some protection or clarity of expectations then a contracting out agreement is necessary and in order to be binding:
- It must be in writing and set out what is separate property and what is relationship property. It can be limited to existing property, specific property or provide for all property both existing and future;
- The parties need to be independently advised by their lawyer before signing so that they can understand what they are contracting out of and what it may mean for them legally going forward; and
- Each parties’ signature to the agreement must be done in front of their lawyer who witnesses their signature and certifies that the party has received independent advice.
Once signed, contracting out agreements continue until the relationship ends by separation or death. At that point the property is dealt with in accordance with the agreement. Parties should review these agreements regularly (approx. 5 yearly or upon a significant change of circumstances or life events), to ensure that it still reflects the couple’s wishes and circumstances. Not undertaking these reviews risks the agreement becoming unfair or having unintended consequences after years of a committed relationship. However, at any time an agreement can be formally revoked or varied, which should also be discussed with your lawyer before being formally recorded in writing, independently advised, signed and witnessed.
Contact our Family Law team today.