When entering a committed relationship, few couples anticipate the possibility of separation or the legal complexities that can arise if it occurs. Yet under the Property (Relationships) Act 1976, the default assumption is that relationship property will be divided equally after three years of living together as a couple, marriage, or civil union with limited exceptions.
Katie Hollister-Jones
For many, this one-size-fits-all approach doesn’t reflect their personal circumstances, financial contributions, or future intentions.
A Contracting Out Agreement (also referred to as a “pre-nup”) offers a proactive solution. It allows couples to define their own rules for property ownership and division, providing clarity, protection, and peace of mind.
What is it?
Under section 21 of the Property (Relationships) Act 1976, spouses, civil union partners, or de facto partners may make any agreement they think fit with respect to the status, ownership, and division of their property (including future property). This allows couples to create their own rules as to how they wish to deal with their property.
These agreements can be made before or during a relationship. To be legally valid, they must meet strict requirements:
The agreement must be in writing and signed by both parties.
Each party must receive independent legal advice from separate lawyers.
The lawyers must witness the signatures and certify that they explained the implications of the agreement to their respective clients.
The benefits of a Contracting Out Agreement
Contracting Out Agreements can help establish clear expectations. Relationships thrive on trust and transparency, and this extends to financial matters. By outlining how assets and debts will be treated, these agreements provide certainty in the event of separation.
They can also safeguard personal contributions, often referred to as “ring fencing.” One partner may already own a home, run a business, or have received an inheritance. Family members may contribute financially, such as helping with a deposit for a first home.
A Contracting Out Agreement ensures these contributions are protected, rather than being absorbed into the pool of relationship property.
These agreements support blended families and future planning. For those entering a relationship with children from a previous partnership, protecting assets for those children is often a priority. Agreements can set out how property is to be dealt with in the event of separation by way of death.
Finally, Contracting Out Agreements help support the integrity of a trust. Trusts are commonly used to protect assets, but timing and context are crucial. Creating a trust at the start of a relationship may unintentionally expose assets to future claims.
A Contracting Out Agreement ensures both parties agree on how trust assets are treated and provides a clear legal record to help safeguard the trust.
Whether you’re entering a relationship with significant assets, blending families, or simply seeking financial transparency, a Contracting Out Agreement empowers you to take control of your property rights from the outset.
If you’re considering a Contracting Out Agreement or simply wish to understand how it might apply to your situation, the team at Tompkins Wake is here to help.
Our experienced family law specialists can guide you through the process, ensure your agreement meets all legal requirements, and tailor it to reflect your unique circumstances and future goals. Reach out to Tompkins Wake today.
- Katie Hollister-Jones is an Associate at Tompkins Wake, Rotorua.
- She can be reached on 07 245 0551, 021 586 197 or Katie.hollister-jones@tompkinswake.co.nz
Divided wooden house puzzle symbolizing family assets and separation division money
