Entering a committed relationship brings with it the challenge of navigating the complex world of property division and financial arrangements. To safeguard your assets and ensure a fair distribution in the event of separation or death, it is essential to understand the intricacies of Relationship Property Agreement. In this blog post, we will guide you through the key aspects of relationship property agreements, the differences between relationship and separate property, establishing a de facto relationship, crafting a contracting out agreement, navigating property division upon separation or death, dealing with debts, and valuing non-financial contributions.

Key Takeaways

• Understand the parameters of a legally binding relationship property agreement.
• Ensure fairness and protection for individual assets in relationships, de facto or otherwise.
• Consider financial obligations as well as non-financial contributions when determining division of property upon separation or death.

Understanding Relationship Property Agreements

A relationship property agreement, often referred to as a “pre-nup,” is a privately-negotiated arrangement between partners outlining the division of assets in the event of separation or death. Applicable to married, civil union, and de facto couples, these agreements provide a clear and agreed-upon division of assets when the relationship ends.

Relationship property agreements acknowledge both financial and non-financial contributions made by each partner, allowing for a fair distribution of assets and liabilities.

Key elements of a relationship property agreement

The Property (Relationships) Act 1976 outlines the parameters of relationship property, which includes the classification, valuation, and division of assets. Relationship property typically consists of assets acquired during the relationship or used for family purposes. Separate property, on the other hand, includes assets owned prior to the relationship, gifts, and inheritances.

Obtaining independent valuations of assets and adhering to legal procedures are necessary steps when drafting a relationship property agreement, ensuring a fair and legally binding division of property.

Benefits of having a relationship property agreement

Implementing a relationship property agreement offers the following benefits:

• Certainty in property division by precisely delineating what property is deemed relationship property and what property is separate property
• Protection of individual assets
• Prevention of potential court proceedings

Relationship property agreements promote fairness by clearly outlining asset and liability divisions between partners, thus counterbalancing power imbalances. They also provide clarity during separation or divorce.

Determining Relationship vs. Separate Property

Differentiating between relationship and separate property is essential to ensure a proper division of assets upon separation or death. Under the Property (Relationships) Act 1976, property owned by either partner is classified as either relationship property or separate property. When dividing relationship property, it is typically divided equally, while separate property remains with the individual who owns it.

Comprehending the differences between these two types of property is necessary for the protection of individual assets and for navigating the intricacies of property division in relationships.

Identifying relationship property

Relationship property includes:

• Assets acquired during the relationship
• The family home
• Belongings purchased for joint use
• All income and property acquired during the relationship
• Any increase in value of superannuation or life insurance plans during the relationship

In some cases, assets acquired individually may be classified as relationship property if they are utilized for shared purposes in the relationship.

Identifying separate property

Separate property consists of:

• Assets owned by a partner prior to the relationship
• Gifts
• Inheritances
• Assets purchased with separate property that were not employed for the benefit of the relationship

Separate property remains with the individual who owns it and is not subject to division under relationship property law.

Separate property is considered as the property of an individual. It does not become relationship property until it is intermingled with the property of other members of the family, or used for family purposes.

Establishing a De Facto Relationship

In addition to married and civil union couples, the Property (Relationships) Act also applies to de facto relationships, which are defined as two individuals living together as a couple without being married or in a civil union. Establishing a de facto relationship has implications on property division, making it important to understand the criteria for determining if a de facto relationship exists and how it affects the distribution of assets.

Criteria for a de facto relationship

The legal criteria for establishing a de facto relationship include both partners being aged 18 or above, living together as a couple for a minimum of three years, and having a mutual commitment to a shared life. The court takes into account factors such as the duration of the couple’s relationship, the extent of their commitment to a shared life, shared domicile, division of duties and expenses, financial and property arrangements, care and support of any offspring, and the presence of a sexual relationship. The moment their relationship began is also considered in the evaluation.

Property division in de facto relationships

For de facto relationships that have persisted for more than three years, the primary principle of property division is that the property of the couple is divided equitably between the partners. In the case of shorter de facto relationships, the division of assets is determined by the financial and non-financial contributions of each individual partner.

Awareness of these regulations is necessary for a fair division of assets in de facto relationships.

Crafting a Contracting Out Agreement

A contracting out agreement, also known as a prenuptial agreement, allows partners to deviate from the equal sharing rule for married or de facto couples, outlining each partner’s individual separate property. Creating and enforcing a contracting out agreement can protect individual assets and avoid disputes in the event of separation or death, ensuring that both parties are aware of their respective positions in the future.

Steps to create a contracting out agreement

To create a legally binding contracting out agreement, both parties must formulate a written agreement, obtain independent legal counsel prior to signing, and have the agreement certified by the independent lawyers. Ensuring that the agreement is drafted meticulously and follows the prescribed legal procedures is paramount to guaranteeing its validity and enforceability.

Enforcing a contracting out agreement

In case of separation or death, a contracting out agreement can be enforced if it is considered fair and reasonable. However, challenges to its validity may arise due to:

• Misrepresentation
• Undue influence
• Unfairness
• Serious injustice
• Pressure or duress
• Improper drafting
• Failure to adhere to the prescribed process.

Consulting legal counsel is necessary to confirm the legal binding and enforceability of the contracting out agreement.

Navigating Property Division upon Separation or Death

When a relationship ends or a partner dies, navigating the division of property can be a complex and emotional process. Relationship property agreements can provide clarity and fairness in such situations, ensuring that both parties’ assets are protected and divided equitably.

Awareness of the rules and regulations pertaining to property division upon separation or death is necessary during such challenging times.

Property division upon separation

Upon separation, relationship property is typically divided equally between partners, taking into account both financial and non-financial contributions made during the relationship. Partners can negotiate and reach an agreement on the division of property, with the assistance of a lawyer specializing in relationship property, who can create a binding agreement in accordance with the Property (Relationships) Act 1976 for both partners to sign.

Property division upon death

When a partner dies, the division of relationship property is subject to the same regulations as those applicable upon separation. The surviving partner can choose to accept the bequest left to them in the will or seek a claim of a half share of the relationship property under the Act. Making this decision within the stipulated six-month time frame is essential to ensure a fair and proper division of assets.

Dealing with Debts in Relationship Property Agreements

Debts are an integral part of relationship property agreements, as they can significantly impact the division of assets. Comprehending the differences between relationship and personal debts, and the responsibilities related to joint debts, is necessary for managing debts in relationship property agreements and ensuring a fair distribution of assets and liabilities.

Distinguishing between relationship and personal debts

Relationship debts are those jointly incurred by partners or incurred by one partner for the benefit of the relationship. Personal debts, on the other hand, are those incurred prior to or after a relationship or in relation to separate property.

Relationship debts are shared between partners. However, when it comes to personal debts, they remain the responsibility of the partner who took them on, making it partly a personal debt. In this context, it’s important to understand the concept of relationship debt and how it differs from individual financial obligations.

Handling joint debts

Joint debts, such as joint loans, joint credit card debts, or joint hire purchase agreements, are considered shared and typically divided equally between partners in the event of separation or death. Both partners are responsible for repaying joint debts, and the division of these debts may differ depending on the laws and regulations of the jurisdiction in which the individuals reside.

Non-Financial Contributions in Relationship Property Agreements

Non-financial contributions, such as childcare, household management, and career sacrifices, significantly contribute to the overall prosperity of a relationship. It’s necessary to recognize and value these contributions in relationship property agreements to ensure a fair and equitable division of assets and liabilities.

Types of non-financial contributions

Non-financial contributions include:

• Caring for children or other relatives
• Managing the household
• Rendering services in the relationship
• Making career sacrifices

These contributions may not have a direct monetary value but play a vital role in the success and well-being of the relationship and should be acknowledged in a relationship property agreement.

Valuing non-financial contributions

Valuing non-financial contributions involves considering the extent to which each partner has contributed to the acquisition, conservation, or improvement of any property, as well as the value of non-financial contributions such as childcare, household management, and support provided to the other party.

The court will assess the value of these non-financial contributions in relation to the overall division of assets, ensuring a fair and equitable distribution of relationship property.

Summary

In conclusion, understanding the intricacies of relationship property agreements is essential for protecting individual assets and ensuring a fair division of property in the event of separation or death. By recognizing the differences between relationship and separate property, valuing non-financial contributions, and navigating property division upon separation or death, couples can achieve a just and equitable distribution of assets and liabilities. With the right knowledge and guidance, navigating relationship property agreements can be a smooth and manageable process.

Frequently Asked Questions

What is a property relationship agreement?

A property relationship agreement, sometimes referred to as a ‘pre-nup’, is an agreement made between two people in a relationship that outlines what constitutes separate or relationship property and what happens in the event of a separation or death. These agreements can be established at any time, even after the end of the relationship.

How much does a relationship property agreement cost NZ?

Creating a Relationship Property Agreement typically costs between $1,500 – $2,000 plus GST, as well as the cost of independent legal advice. Additionally, applying for a Relationship Property Order will cost $700, and $906 for each half-day of the hearing, regardless of its length.

What is classed as relationship property?

Relationship property is generally defined as family home, family chattels, income earned during the relationship, property owned jointly or in equal shares, and property bought or created by either partner during the relationship.

What is an example of relationship property?

Relationship property is any property acquired during a relationship, such as joint assets, inheritances or gifts. It also includes property acquired in contemplation of the relationship, like a holiday home bought pre-marriage, and superannuation and Kiwisaver policies relevant to the relationship period.

How long do you have to be in a relationship to take half NZ?

Couples in a de facto relationship for at least 3 years should divide their property equally. If the couple has been together less than 3 years, they can still divide property if a court determines that not doing so would cause serious injustice.