Commonly referred to as a “pre-nuptial” or “pre-nup,” a contracting out agreement can be a crucial safeguard in the unfortunate event of a separation or the passing of a spouse/partner.

In New Zealand, the Property (Relationships) Act 1976 dictates that, after three years in a qualifying relationship (de facto, marriage, or civil union), “relationship property” should be divided equally in case of separation. A contracting out agreement allows couples to “opt out” of these standard relationship property laws, providing clarity on ownership and division of assets.

When to Consider a Contracting Out Agreement:

Entering a New Relationship with Personal Assets:

Consider an agreement if you bring personal assets (e.g., home or business) into a new relationship.

Significant Contribution to Assets:

Protect a substantial contribution to your or your spouse/partner’s assets with a contracting out agreement.

Purchasing Property Together:

If buying a property jointly, clarify your intentions to prevent equal division in the future.

Inheritance Protection:

Safeguard inherited funds intended for mortgage payment by designating them as separate property.

Parental Gifts or Assistance:

If parents provide financial assistance, ensure clarity on how it affects property division.

Children from Previous Relationships:

Address financial provisions for children from prior relationships in case of death.

Having open discussions about these aspects can prevent future stress. Seeking legal advice is crucial to understanding your position and navigating the situation effectively.

Legal Advice and Process:

Independent Legal Advice:

Obtain independent legal advice for the agreement to be legally binding. Family law experts ensure your interests are protected and the agreement is comprehensive.

Timing of Agreement:

While you can create an agreement at any relationship stage, it’s simpler before relationship property laws apply.

Regular Review:

Regularly review the agreement, preferably every 3-5 years or when financial or non-financial circumstances change. Legal advice helps assess fairness amid life changes.

Initiating these conversations and seeking legal guidance ensures a watertight agreement that stands up to legal scrutiny. Prioritizing the creation and periodic review of contracting out agreements secures financial well-being and provides peace of mind for couples.