Need to know about prenups, contracting out and relationship property under New Zealand law? This blog answers some common questions.
What is a contracting out agreement or prenup?
A contracting out agreement, also known as a prenuptial agreement, a prenup, or a relationship property agreement, is an important way to protect your assets from equal division with your partner on separation or death.
What should you do when you begin a new relationship?
Starting a new relationship can be an exciting time. It is important to think about the effect that a possible separation could have on the assets that you have built up.
Even if you do not separate, the relationship property division rules also apply on death. This is a further reason why you should have a clear agreement about what will be separate property and what will be shared as relationship property.
In most cases, relationship property will be shared equally. Relationship property, for example, includes the home that you and your partner live in, even if you owned it before the relationship began. Relationship property also includes all income that you earn during the relationship and therefore what you may think of as “your” savings and investments are in fact relationship property.
Who should have a contracting out agreement?
If you have a differing asset position at the start of a relationship then it is usually worth considering an agreement. It may not be worth the expense if the difference is only marginal, for example, a difference of less than about $10,000.
When should we get one?
A discussion about a contracting out agreement is not a first-date topic! On the other hand, it should not be left too long. We think that approximately 12 to 18 months into the relationship is about right.
Should I use a template contracting out agreement?
One size does not fit all. It is sadly our experience that some lawyers use one template to draft a contracting out agreement or prenup, whether the clients are wealthy or not, or whether the clients are young or middle aged. That may be convenient or more cost-effective for the lawyer, but it usually produces an inferior service for the client.
For example, younger clients and older clients should usually have different agreements. At the very least, there should be a full discussion with the younger clients about the very high risk of a contracting out agreement that keeps everything separate for the duration of a lengthy relationship being set aside on separation and the contracting out agreement therefore being worthless.
Clients also have their own wishes. Some clients only want to ring fence their pre-relationship house as their separate property. Other clients want to keep everything separate. The agreement should ideally reflect what the clients want.
Are contracting out agreements watertight?
A contracting out agreement can be set aside by the Family Court if giving effect to it would cause serious injustice. If the contracting out agreement is well drafted and appropriate for the couple – the discussion in the previous section – then it will probably stand up to a challenge.
It is usually not a “set and forget”. For example, a contracting out agreement that keeps everything separate could be OK if the relationship only lasts for 4 or 5 years. On the other hand, it is highly likely to be successfully challenged if the couple has had two children, the relationship has lasted 10 years, and the one partner has very little in the way of assets and the other partner has almost all of the assets in his name.
What does a prenup or contracting out agreement cost?
At Shine Lawyers we try to be cost-effective in our work while achieving results for our clients.
Because the amount of work involved differs, it is not possible to give an estimate of what it will cost. We are happy to discuss our fees with you.
How Shine Lawyers can help
Please contact us to discuss how we can help you. Feel free to phone us to discuss or make an appointment to come in to meet us so that we can start helping you to come up with an appropriate solution to your situation.
Get in touch today to discuss your options.