The law in New Zealand states when a marriage, de-facto relationship or civil union ends, there is a presumption of equal sharing in all relationship property and relationship debt. The Property (Relationships) Act 1976 defines “relationship property” as all property acquired for or during the relationship. This also includes property acquired by one party prior to the relationship commencing, if it is used for the benefit of the relationship. The definition further states that relationship property includes the family home, whenever it is acquired. The family home is generally defined as the main residence for the couple or family during the relationship.
In New Zealand it is possible to contract out from the presumption of equal sharing in all relationship property and debt. A contracting out agreement (also known as a pre-nuptial agreement) protects each of the spouse’s or partner’s individual interests in property. Such an agreement specifies the ownership and entitlements of each party in the property and debt. Although a contracting out agreement can be obtained at any point during the relationship, it is recommended that an agreement is entered into as early as possible.
You might have heard of ‘pre-nuptial agreements’ from American television and films. We call them ‘contracting-out agreements’ in New Zealand and they are highly recommended when entering into a long-term relationship.
A contracting-out agreement is a written document that legally binds two people to how property is to be divided if the relationship ends. Humans in love tend to not focus on the negatives, but many relationships do end eventually and the cost of dividing the property can be high. Portia recommends a contracting-out agreement when going into any relationship where one party solely owns the family home; there has been a previous relationship for one or both parties, resulting in significant property for one party; there are children from a previous relationship and their interest or entitlement needs to be protected; one party has significant debt, or; you simply do not want to risk having to share assets and debt equally.
In 2011 Time Magazine published an article based on a US debt company’s efforts to warn people of debt exposure when entering into a new relationship and highlighted the issue of people entering into relationships without thinking of the consequences if things somehow went badly.
New Zealand law states that if you marry someone (or enter into a civil union, or live together for three years) then you might be liable for that debt if the relationship doesn’t work out. In addition if your partner is irresponsible with money and spending while you are together – and doesn’t tell you – then you could be paying the price of that trust for years to come.
Research conducted in the USA showed 73% of married people said spending more than $100 without telling a spouse is unacceptable; 79% of married people are more likely to talk about financial infidelity with a friend as opposed to their spouse; 30% thought financial infidelity was just as bad as sexual infidelity, and 80% of spouses spent money their spouses didn’t know about.
* Phrase coined by CESI Debt Solutions, published Time Magazine 09 February 2011
When a couple gets married any previous wills in force for either party are instantly revoked unless the parties’ wills were specifically made in contemplation of marriage. This means that unless a new will is made and a party dies, then they are intestate, and their property will be divided according to the Administration Act 1969. You should also consider the impact of a sudden death if you have no contracting-out agreement, particularly around the repayment of debt. It is the responsible thing for both you and your partner to meet with a lawyer early in your relationship to consider the implications of the law in this case.
You can protect yourself by doing some simple things such as discussing debt, property and death early on in the relationship. Seek the advice of friends or family who have been in long-term relationships or (more importantly) who have had relationships that have failed.
It’s no fun having this conversation and we hope you never ever have to experience the sudden or unexpected end to what you expected would be a lifelong bond with someone. But having the conversation now, in a mature and serious way, will help you later in times of grief and stress.
It is recommended that if you enter into either a contracting-out agreement or will that you seek the assistance of a lawyer. This is to protect your interests if/when you need to execute the agreement. If it has not been crafted with clear language and if you or your partner haven’t received competent legal advice at the time of signing, then you might end up having the agreement challenged in Court.
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Yes. They are called contracting out agreements and can be drawn-up by a lawyer. They are binding on both parties and superceeds some general principles of the Property (Relationships) Act.
Contracting out agreements are fairly straightforward documents, and a lawyer can prepare one for both parties, but one of the parties must get advice from an independent (different) lawyer for it to become legal. Costs range from between $1,400 to $2,080 for the initial advice and agreement, and between $1,050 to $1,400 for the independent legal advice.
Ideally, before the relationship starts because property is 'separate'. As soon as the relationship becomes recognised under law then property can become 'entangled' and it can be a bit trickier (and therefore more costly) to draft the agreement.
Spouses, civil union partners, or de facto partners, or any two persons in contemplation of entering into a marriage, civil union, or de facto relationship, may make any agreement they think fit with respect to the status, ownership, and division of their property (including future property). An agreement made under the Act may relate to the status, ownership, and division of property either during the joint lives of the spouses or partners, or when one of the spouses or partners dies.
Usually from the point you enter into a marriage or civil union, or after three years in a de facto relationship the Property (Relationships) Act applies. Be aware that a de facto relationship can be subjective: it isn't always obvious when such a relationship starts. This is often something that is disputed and requires a Judge's intervention.
A relationship property agreement is not the same as a contracting-out agreement (pre-nup). If you do not have a contracting-out agreement in place and your relationship ends, then you might need to negotiate a relationship property agreement or ask the Family Court to make a final order to settle any dispute. The relationship property agreement is what is signed by both parties and allows for the property to be divided. If there is disagreement then cost for this would be in the range of $7,700 to $11,600 and includes the fee for mediation. If both parties were in agreement then expect a cost between $2,700 and $6,600. litigation (going to court) would be far more expensive.
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