Case study
Ms A
Protection of Assets When Entering A New Relationship
Having worked hard to build assets prior to the commencement of her de facto relationship, with her partner now living in her home, Ms A was at risk of her assets being divided equally between her and her partner if her relationship was to fall apart.
Key Issues
Ms A had spent a number of years building her assets. Over the years, this had built to a significant nest-egg, including three properties, a tidy savings account and some shares. Ms A met her partner, and he moved into Ms A’s home with her. Ms A’s partner paid “rent” to Ms A, although they did not have any formal agreements about this. The parties shared the costs for day to day living expenses and utility expenses, although Ms A paid the council land rates and insurances for the home.
Ms A sought our help to protect the assets she owned prior to the relationship in the event of the parties separating. At the time she saw us, she and her partner had been in a de facto relationship for 2 years and were engaged to marry in 2022.
Ms A owned her assets in her personal name. As Ms A’s new partner lived with Ms A in her property, under the Property (Relationships) Act 1976, the home in which they resided together as deemed to be the ‘family home’, and as such, relationship property under the Act, even though Ms A purchased the property prior to the parties’ relationship commencing. The default position at law is that relationship assets and liabilities are divided between the parties in equal shares.
There are different principles that apply if a relationship is less than 3 years (which is classified as a relationship of short duration), however Ms A and her partner had no intention of separating and were planning to marry so the short duration was unlikely to apply in her case.
How We Helped
Ms A wanted peace of mind. She had worked for a number of years to build her asset base. We drafted a section 21 Contracting Out Agreement for Ms A to account for:-
- EThe protection of her assets acquired prior to the relationship, including the property in which the parties resided.
- EA formula for compensating or otherwise recognising her partner’s contributions to the property in which they resided, as well as any work he completed on the property,
- EProvision for how assets acquired during the relationship would be divided between the parties,
- EA review period in case of life-changing or milestone events occurring.
We also drafted a new Will for Ms A made in contemplation of her marriage, to ensure that her partner/spouse would be provided for in the way they agreed and she intended, rather than the default position under the relevant legislation.
Services We Provided
While this case required the expertise of Amy Chesnutt and her team in the area of Relationship Property Law, Estate Planning was also required in order to future-proof Ms A and safeguard both her and her partner’s future intentions.
Relationship Property
We can draft and advise on Contracting Out Agreements if you are considering entering a de facto relationship, getting married, entering in a civil union and/or want to protect your assets.
Estate Planning
Planning for the future may include preparing a Will, Powers of Attorney, and restructuring your asset ownership. When a loved one dies, you may need to apply to administer their estate, or may need representation in relation to such.
CONCLUSION
If you are entering into a new relationship, or if your relationship is developing into a serious relationship, you should turn your mind to whether you need to take steps to protect your assets. Many of our clients have worked hard to build a nest egg, and without protections in place, those assets may be deemed as relationship property and form part of the property pool in the event of separation. In Ms A’s case, an agreement contracting out of the Property (Relationships) Act 1976 is the surest way to safeguard those assets from any unwanted or unintended consequences. Updating her Will at the same time as the Contracting Out Agreement ensured that Ms A’s intentions – both now and in the future – accurately reflect her position today.
Tips & Advice
S21 Contracting Out Agreements Can Be Tailored
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Take Steps To Protect Your Assets Early
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Know Your Rights When It Comes To Your Assets
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FAQs
What is a Contracting Out Agreement?
A Contracting Out Agreement, commonly known as a pre-nuptial agreement or “pre-nup” is an agreement made under section 21 of the Property (relationships) Act. These agreements contract out of the Act – meaning that the division of your assets upon separation will occur in accordance with the Agreement, rather than in accordance with the Act. Read more
What does a Contracting Out Agreement involve?
For a Contracting Out Agreement to be binding, the following elements must be met:-
- The Agreement must be in writing
- The Agreement must be signed by both parties
- The Agreement must be witnessed by a lawyer
- Each of the parties must have independent legal advice before signing the Agreement
- The lawyer who gave the advice must certify that prior to signing the Agreement, they explained the effect and implications of the Agreement to the party
What can a Contracting Out Agreement cover?
A contracting out Agreement can be tailored to suit your circumstances. Parties can agree on what property is relationship property (jointly or co-owned assets), what are relationship debts (debts which you are both responsible for) and separate property (property that is own by one party to the exclusion of the other). Read more
Terms
Family Home
The dwellinghouse that either or both of the spouses or partners use habitually or from time to time as the only or principal family residence, together with any land, buildings, or improvements appurtenant to that dwellinghouse and used wholly or principally for the purposes of the household; and includes a joint family home.
Relationship property
all property owned by either spouse or partner immediately before their relationship began, if the property was acquired in contemplation of the relationship; and the property was intended for the common use or common benefit of both spouses or partners; Read more
Separate Property
In s9 this is defined as property owned by a spouse or partner that is not relationship property and includes any property acquired out of separate property or any increase in the value of separate property.
about the author
Amy Chesnutt
PARTNER
Amy has extensive litigation experience, representing clients in the Family, District and High Courts District of New Zealand and the Magistrates Court, District of Queensland, Federal Circuit Court of Australia and Family Court of Australia.
about the author
Alisha Castle
SENIOR ASSOCIATE
Alisha has appeared in the Family Court, the Māori Land Court, the Māori Appellate Court, the High Court and in various inquiries before the Waitangi Tribunal for a number of Treaty of Waitangi claimants.
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