Divorce data dissection
It’s an oft-quoted figure bandied about when it comes to marriage break-ups: half of us who make it to the altar will divorce. Ah, but nay, say our national number crunchers; that’s actually quite the urban myth.
According to Statistics New Zealand, which monitors the number of marriages and divorces over time, the marriage dissolution rate is, in fact, closer to a third. Our statisticians say a bit of crude extrapolation’s to blame for this commonly-touted, albeit false, factoid. There are around 20,000 marriages and 10,000 divorces in any given year, but that, they point out, doesn’t equate to a 50 per cent divorce rate – because it doesn’t accurately factor in all the marriages of the previous years.
And while dissecting divorce data is clearly a tricky affair, divvying up relationship property in the wake of a split can be no walk in the park either.
Nowadays, who gets what if time’s called on a partnership is guided by the Property (Relationships) Act, whether it’s a marriage, civil union, or a de facto relationship. The general – and I emphasise the “general” – rule of thumb is a 50-50 share of the assets. For some couples, however, the great divide is not that clear cut, and it can take years – literally – for relationship property tussles to be resolved.
While it’s heartening that not quite as many marriages end in divorce as rumour had it, a one-in-three likelihood is still no statistical drop in the bucket – and it doesn’t take into account the many couples in intimate relationships, other than marriages, who call it quits. Having worked with hundreds upon hundreds of people over 30-odd years trying to sort out assets in the throes of separation, I’m more convinced than ever, navigating that gnarly “what if” during – yes, during – the relationship can save much heartache and bitterness, not to mention protracted proceedings and legal fees, should the relationship not go the distance.
Um, honey, can we talk?
Yes, it’s a big, awkward ask, I know. Discussing the theoretical demise of a currently wonderful, fulfilling and trusting relationship – and, moreover, pitching perspectives on entitlements, especially if either party’s keen to ring-fence assets – can feel quite counter-intuitive, if not downright wrong. It is a tough call, but one that many later regret not making. Assets that were, in the beginning, separate can become relationship property simply through the passage of time.
Section 21 of the Property (Relationships) Act gives couples the right to “contract out” of the default provisions enshrined in law. You might know it as a “pre-nuptial agreement”, which is something of a misnomer, as these contracts aren’t just for those contemplating marriage. They can be drawn up to cover spouses who’ve already tied the knot, as well as couples in, or contemplating, a civil union or de facto relationship. Contracting out of the Property (Relationships) Act means, in the event of a split, rather than assets being divided in line with the prescribed law, the separated couple is bound by their individualised agreement. A big “but” in this, however, is that the contracting out agreement must be robust and have been drawn up in accordance with the legal provisions under the Act.
Essentially, these agreements cover three key components: specifically what property will be owned together, noting whether it is to be shared equally or specifying the proportion; what assets will remain separate property of each party, and identifying any property that won’t be classed as separate property, because it has been, or will be used, jointly.
Safeguarding your agreement
To ensure any contracting out agreement is not invalidated from the get-go, it’s imperative the special procedures are followed: there must be full disclosure of assets; the agreement must be in writing and signed by both parties; each party must have received independent legal advice; a solicitor must witness each party’s signature, and certify that the effect and implications of the agreement have been explained to the signatory.
The Court can still cancel an agreement if it finds it would cause a “serious injustice”. What’s important to note here is that the Court will consider not only if the contract was unfair and unreasonable at its inception, but whether it has become so over time. It is still, though, a very high bar to climb over to have an agreement set aside. However, if you have, or plan to enter into, a contracting out agreement, remember to plot in regular reviews to ensure it’s still fair and reasonable and, hence, will stand the legal litmus test if challenged.
So what of couples who’ve been together less than the prescribed three years – or a “relationship of short duration”, as it’s referred to in law? Generally, unless there’s a contracting out agreement, it’s accepted that a separating couple, if they are married or in a civil union, will take from the relationship what they brought into it, and their contribution during the partnership. In cases of separating couples, whose de facto relationship didn’t last for three years, the Property (Relationships) Act does not usually apply – however, there are special exceptions, for example a child being brought to, or born in, the relationship, or where one party has made substantial contributions and the Court is satisfied that serious injustice would result. So, if you separate, it’s worth seeking advice before reaching any agreement. Believe me, there is still a lot of room for argument, even in the case of a relationship that goes asunder before the three-year mark, and that’s where a contracting out agreement can do away with the uncertainty and the battles.
Different strokes …
The law around relationship property can be just about as complex as the partnerships it covers. Every intimate pairing is different; there’s no one-size-fits-all solution, and the law can swing different ways, depending on individual circumstances. That’s why it’s vital to seek advice, and best to do that, ironically, when all is well in the relationship – especially when there are children involved.
As hard as it may feel, discuss with your partner or spouse how they see things panning out should the relationship end. In my experience, the longer you leave it into a relationship, the harder it can become. Don’t be shy about talking your options through with a lawyer, either. My general advice to clients who feel the Property (Relationships) Act doesn’t adequately cover their circumstances? If in doubt, contract it out.
Last updated 3 November 2016