Choosing to separate is a big decision, but the tough choices don’t end there.

Once you and your partner have decided to separate, you need to start the tricky process of untangling your shared financial life.

The longer you’ve been a couple, and the more assets you have, the harder it can be to divide your property.

Talk to your lawyer first

Caroline Hickman, chair of the Family Law Section of the New Zealand Law Society, says the first step is to get legal advice as soon as possible.

Then you should talk to your partner early, if you can, sitting down and discussing what you want to achieve.

The presumption of equal sharing applies to all relationships lasting over three years, but if you can work it out together, you can often come up with creative solutions on how to split your property.

Hickman says you should look for a lawyer who’ll work the way you’d like them to, for example by helping you get through the process as quickly and amicably as possible.

“People often have a range of concerns other than the dollar figure to consider in a separation,” she says.

“For some people, it’s really important to leave with dignity, for an outcome to be fair to everyone, to preserve relationships for the sake of the children or any number of other factors.

“This isn’t LA Law, where everybody heads off to court for a divorce suit. There are lots of ways to solve problems short of court proceedings, like mediation and collaborative law.”

In fact, most cases are resolved without going to court, she says. “Although if your partner is determined on a particular course, or they’re obstructive with disclosure, you will probably end up there.”

Dealing with the family home

For the average Kiwi couple, the family home is the largest asset – although even for couples with businesses and huge investment portfolios, the same principles apply.

The most common ways to deal with the family home are to either sell and split the proceeds, or for one person to buy out the other.

Usually, says Hickman, the aim is to ensure that both people remain on the property ladder, if possible.

“For example, mum and the kids might stay, and in some cases, there might be an acceptance of something less than an equal share to allow one party to remain in the home.

“While the law is clear about equal sharing, that doesn’t stop parties agreeing on something they consider fair, provided they’ve had full disclosure of all the assets and liabilities, and they’re given good advice.”

If the partner who remains in the house earns significantly less, they might get compensation for that economic disparity.

There may also be a claim and payment for ‘spousal maintenance’, which is where one partner helps the other to fill the gap between their earnings and expenses, after the relationship breaks down.

That should help even the financial playing field so the lower-earning partner can pay the mortgage.

Challenges with rising values

The rapidly increasing home values of the past year have created extra headaches for family lawyers.

The partners may come to an agreement after many months of work, only for one of the parties to demand a revaluation at the eleventh hour.

And then at least one of the parties needs to buy in what could be a fast-rising market.

“Staying on the property ladder is usually a goal for both people, but at the moment the rungs are moving as they’re trying to climb,” says Hickman.

Another issue is the growth of the ‘silver splitters’ – the rate of separations for those aged over 60 has risen in recent years. They face an extra challenge: banks typically won’t approve home loans for those who are either retired or close to retirement.

“It can be traumatic for older couples who suddenly don’t have a home and they don’t have the capacity to take on a mortgage each,” says Hickman. “It’s really hard.”

Be prepared next time

Once you’ve separated and split your property, you may meet someone new.

If you do, Hickman has one piece of advice: “For goodness’ sake, get a section 21 agreement – a prenup – especially with second and subsequent relationships.

“I wish I had a dollar for everyone who says, ‘My partner said they’d never take my nest egg!’, but then found that they did.

“An agreement is the best insurance policy against a claim against separate property wealth.”

Separation in New Zealand

According to the 2019 New Zealand Relationship Property Survey:

• The most common reasons given for separation are ‘Growing apart/falling out of love’ (cited in 75% of breakups), followed by ‘Extramarital affair’ (57%).
• Relationships of between 10 and 20 years’ duration are the most likely to be seeking a separation.
• Those aged 40 to 49 are the most likely to be separating.
• The most common value for relationship property in a separation is NZ$500,000 to NZ$1 million.
• Over half – 58% – of family lawyers charge NZ$301 to NZ$400 an hour; 25% of lawyers charge less and 16% charge more (1% preferred not to say).

What’s in – and out

It’s worth noting that unless you’ve opted out, your KiwiSaver account is relationship property.

It might feel like it’s all your own, but in fact it’s the fruits of the relationship.

On the other hand, any inheritance or gift you receive is your separate property – unless you intermingle it with other relationship property.

Keep it cleanly separated and don’t transfer it into an account with any other shared money.

Take legal advice about any changes in your financial situation (including any inheritance), so that you can make decisions and control what happens, rather than relying on presumptions of what is fair if you split up.