Life can be unpredictable to say the least. And relationships are no exception!
Here in New Zealand, there are default rules that determine how your property is split if your relationship ends. But you and your partner can modify the rules and how they apply to your property, by entering into a Contracting Out Agreement (also called a pre-nup).
Why would you want to modify the rules?
The rules may not reflect what you think is fair. At the time of separation, people are often shocked at how property they thought was theirs, might actually need to be shared with their partner.
Here are some commonly held misconceptions:
Myth 1: The house is in my name, and I bought it before I met my partner so I will get to keep it if we separate!
If you’ve been in a de facto relationship for 3 years or longer, the family home (that’s the home you live in with your partner) becomes relationship property. Whether it’s in one or both your names, it doesn’t matter. And yes, even if they haven’t contributed a single dollar towards the purchase or upkeep of the property!
Myth 2: I am the only shareholder and director of my business, so my partner has no claim to it.
If you started your business while you and your partner were together, it is almost certain to be relationship property, and they will be entitled to a 50 percent share of your business if you separate.
Myth 3: My KiwiSaver is not part of our relationship property.
Sorry to be the bearer of bad news. Any contributions you make to your KiwiSaver account while in a relationship is in fact relationship property so your partner can ask for half of the funds if you separate.
Myth 4: My inheritance is safe from any relationship property claims.
Sometimes but not always. Your inheritance is your separate property unless, you have agreed to mix it in with your relationship property – for example, repaying some or all of the mortgage on your family home. Then you have likely consented to it becoming relationship property so you can’t then ask for it back if you separate.
Myth 5: My home is in a trust so my partner can’t touch it.
Trusts can offer significant protection against relationship property claims. But there are ways that trusts can be vulnerable in a separation, particularly if the trust was established during the relationship or if your partner is named as a beneficiary of the trust.
In the final analysis
Every relationship is different. A Contracting Out Agreement allows you to customise your arrangements based on your specific needs and circumstances. Whether that’s blending families; safeguarding inheritances; or planning for future ventures. A tailored Contracting Out Agreement can provide peace of mind for both parties.
Use our free online tool to get your Contracting Out Agreement sorted: aspiringlaw.co.nz/COA