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Protect Your Assets In A Split

If your relationship ends, your ex could get half your assets. Family law expert Debbie Dunbar, of Morrison Kent, explains how to safeguard yourself.

19 October 2021

You’ve probably heard the horror stories, or maybe you, or someone you know, has been left broke after splitting up with a partner. In New Zealand, if a couple has been in a qualifying relationship for three years or more, the general rule is all of their relationship property will be divided equally if they split.

What is a qualifying relationship?

The law defines a qualifying relationship as a de facto relationship, marriage, or civil union. Marriages and civil unions are easy to define, because you have a certificate. A de facto relationship is between people who aren’t married or in a civil union, aged over 18, and who live together as a couple.

The tricky part can be determining whether people are ‘living together as a couple’. It’s possible to be deemed to be living together as a couple, even if you have not physically moved bags and boxes in together. The law says that all circumstances of the relationship are taken into account, including things like how long you’ve been together, the nature of the relationship and where you live, your finances, property you might own, your level of commitment, and the care and support of children. These factors are just a guide, and situations are assessed case by case.

What is relationship property?

Relationship property can include your family home and contents, vehicles, savings, KiwiSaver savings, any other assets, and debts gained during the relationship.

Assets initially viewed as separate property, for example money inherited, can become relationship property, depending upon what you do with the money. For example, if you use an inheritance to reduce the mortgage on your family home, it could then form part of your relationship property. Working out what’s relationship property and how it’s divided can be complex, and varies hugely between different couples.

Can I protect my assets?

If you don’t want to halve your assets, you might consider a Contracting Out Agreement (also known as a prenup or Relationship Property Agreement) that defines how assets and debts will be divided if you separate.

Setting up a trust could be another layer of protection, depending on when it is set up and how it is operated. Or, you might want to do both. A common situation is when a couple is buying a first home together, and one partner is contributing more than the other, for example, one partner has NZ$100,000 in savings, and the other partner only has NZ$10,000 to contribute.

To protect those cash contributions as separate property, they’ll need to enter into a Contracting Out Agreement. The Agreement will record what happens if they split up. For example, each party will receive their cash contributions back and any property value increase, or reduction in mortgage, will be shared equally.

Contracting Out Agreements

You can enter into a Contracting Out Agreement at any stage of a relationship.For the agreement to be binding, it must be in writing and signed by both parties. Each party must have independent legal advice before signing, and a lawyer must witness each party’s signature. Contracting Out Agreements may be challenged. Get advice from an expert, to make sure your agreement is as watertight as possible. Review the agreement regularly to make sure it stands the test of time.

Published 25 November 2019

There are a number of exceptions to the general rule which may affect the division of relationship property. Expert advice should be sought when considering contracting out. The information in this advertorial should not be seen as legal advice or relied upon for that purpose. If you're interested in further details regarding relationship property, please contact our specialist family lawyers on 0508 472 0020.

This article does not contain any financial advice and has not taken into account any particular person’s circumstances. Before relying on it, we recommend you speak with a financial adviser. This story reflects the views of the contributor only. Content comes from sources that we consider are accurate, but we do not guarantee that the content is accurate.

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