We outline below 10 common questions we often get asked about Contracting Out Agreements.
A Contracting Out Agreement (also known as a “pre-nuptial agreement” or “prenup”) is a written agreement setting out how a couple’s property will be divided, in the event of separation and/or death. They are often used to contract out of the general rule of equal-sharing of relationship property under the Property (Relationships) Act 1976 (“the Act”).
An Agreement can cover as much or as little as the couple would like. That could be all property they have (including future property), or only certain items of property.
For example, if one person wanted to use their inheritance to repay a joint mortgage on the family home, they might want to sign an agreement providing for that amount to remain their separate property. Although an inheritance is usually separate property to begin with, by putting it into the family home it will typically lose its separate property status and become relationship property.
An Agreement of this nature can be signed at any time during a relationship. However, it should ideally be signed before the relationship property laws under the Act begin to apply. Generally, that is once a couple has lived together in a de facto relationship or married, or in a civil union (or any combination of these) for 3 years or more, although there are limited circumstances in which the Act can apply before that point.
Yes, providing that it complies with the following formal requirements:
It is important to be aware that even if an Agreement complies with these requirements, the Court may have the power to set it aside if it amounts to “serious injustice”. If an Agreement is set aside, a division of property is usually dealt with as if the Agreement never existed. See Family Court Sets Aside Contracting Out Agreement for further information.
Informal agreements people make between themselves are of no legal effect (although you can, in very limited circumstances, apply for them to be upheld).
Yes, each party needs an independent lawyer; otherwise, the Agreement will not be binding or enforceable.
These are varied, but common benefits include asset protection and a desire to achieve certainty about how property would be divided in the event of separation and/or death.
Contracting Out Agreements are particularly common when one person has considerably more wealth than the other, there are children from previous relationships, or there are particular items of property that one person wishes to keep separate.
This is always going to be an awkward topic, but it is better to be discussed early on in the relationship. How exactly it is broached will depend on the individuals involved, but we often find that surprising someone with an Agreement and telling them to “go and get it signed” doesn’t go down particularly well. A little bit of emotional intelligence can go a long way.
This varies greatly depending on the complexity of the Agreement, and the time it takes to draft, advise on and negotiate the terms. While some people are reluctant to spend much money at all on it, our view is that it is better to get it done properly in the first place. A thorough Contracting Out Agreement can save people considerable amounts of money and legal fees in the long run.
No, it is important that Agreements are regularly reviewed (with the benefit of legal advice) to ensure that the terms do not become seriously unjust, as that can leave them vulnerable to being set aside by the Court.
How often an Agreement should be reviewed will depend on particular circumstances, so it is best to seek specific advice on that.
We find that a brief written history of the relationship (key dates, names and dates of birth of children etc) and information about what each party owns can make the first meeting more efficient.
For further information see Relationship Property, or speak with our family lawyers:
Debbie is a Wellington family law expert and leads JB Morrison’s family team. Her particular areas of expertise are separation matters, relationship property (including asset protection) and contested estates. Debbie is focused on client needs and achieving the best possible outcomes for them in a cost-effective and timely manner.
Maretta is a Rotorua based family lawyer who advises clients across all areas of family law, including separation, relationship property and parenting. She is responsive and will listen to your needs, working with you to achieve the best possible outcome.
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