Most people think prenups are something celebrities sign before a whirlwind wedding. But in New Zealand, a contracting out agreement is far more common, far more practical and, for many couples, essential. Under the Property (Relationships) Act 1976 (“Act”), the guiding principle is that all relationship property should be shared equally when a de facto relationship, civil union, or marriage ends. There are certain exceptions – as always. The only way to avoid the presumed 50/50 sharing regime is to contract out of the Act. That is exactly what a contracting out agreement does. If the agreement meets the legal requirements, it allows couples to decide for themselves how their assets and liabilities will be divided if the relationship ends through separation or death. What happens if you don’t have one?  If you are in a qualifying relationship and don’t have a contracting out agreement in place, most of what you own or owe could be divided equally if you separate or if one partner dies. Think you are safe because the asset is in your sole name or was gifted to you? Think again. In certain circumstances these types of property could still be up for equal division. Why you should seriously consider one For many people, the primary motivation is protection. A contracting out agreement can ring fence specific assets so they remain your separate property, such as a home you purchased before the relationship or savings you built independently. It can also ensure you do not become responsible for your partner’s debt, such as a student loan or personal liabilities that you had no part in creating. Just as importantly, a contracting out agreement sets clear expectations for how newly acquired assets and debts are owned and managed during the relationship and what will happen to those if the relationship ends. By defining everything upfront, the agreement can prevent confusion, conflict and costly disputes later. When can you get a contracting out agreement? A contracting out agreement can be put in place at almost any stage. Some couples arrange one at the very beginning of a relationship. Others do it after buying a home together, having children or blending finances. It is also possible to enter into one at the end of a relationship. However, the safest and cleanest approach is to get one as early as possible, ideally before the relationship becomes a qualifying relationship or before either partner acquires rights under the Act.
Writing your own Will or using a DIY Will Kit may seem like an easy and cost-effective option. However, while a homemade or online Will may appear to save money upfront, it will often cause major complications and costs in the long run. Learn why getting legal advice ensures your Will is valid, effective, and truly reflects your wishes.
Even a small error in your Will can cause significant delays and unnecessary expenses once it reaches the High Court for Probate.
Many people are surprised to learn that they may already be in a de facto relationship in the eyes of New Zealand law, even if they have never formally defined the relationship. This legal status can have significant consequences for how property, assets and liabilities are treated if the relationship ends. Why does it matter? It is important to understand whether you are in a de facto relationship or not because once a de facto relationship has lasted three years (or two years if there is a child of the relationship), relationship property is generally subject to equal sharing. Critically, the equal sharing regime usually includes the home the couple lives in, even if that property was acquired by one partner before the relationship began and/or is in their sole name. What is a de facto relationship? Under the Property (Relationships) Act 1976 (“the Act”), a de facto relationship exists when two people of any gender, who are both at least 18 and who are not married or in a civil union with each other, are living together as a couple. Although the term “living together” sounds simple, the law interprets it more broadly than many expect. How the court decides if a de facto relationship exists If there is uncertainty about whether a de facto relationship exists, or when it started, the Court considers a range of factors. These include the length of the relationship, whether the couple shares a home and a bedroom, whether the partners have a sexual relationship and how their financial affairs are arranged, including whether there is dependence or interdependence between them. The Court may also look at whether the partners own or use property together, whether they demonstrate a mutual commitment to a shared life, whether they care for children together, how household duties are divided and how their relationship is viewed by friends, family and the public. No single factor is decisive. The Court has a wide discretion to weigh these circumstances and determine whether a de facto relationship exists based on the overall context. De facto relationships of short duration The Act can also apply to de facto relationships of short duration (i.e. less than three years). This may occur if the couple shares a child or if one partner has made a substantial contribution and the Court considers that a serious injustice would result. In these situations, property is divided according to each partner’s contributions rather than the equal sharing regime. Polyamorous relationships Although the Act defines a de facto relationship as being between two persons, the Supreme Court ruled in 2023 that polyamorous relationships can also fall within the framework of the Act. The Court confirmed that a polyamorous partnership may amount to a series of de facto relationships. In the case before the Court, three partners were involved in overlapping relationships, (two de facto relationships and one marriage) and their intermingling relationship property interests were subject to division under the Act. Protect yourself – get a contracting out agreement If you are in a de facto relationship, or think you may be in one, it is sensible to consider a contracting out agreement. This agreement can ring fence specific assets so they remain your separate property and can ensure you do not become responsible for your partner’s debt that you had no part in creating. It can also set out clear expectations as to how future property will be classified and how assets and liabilities will be divided if the relationship ends through separation or death.
If a person is so longer able to make decisions for themselves, you may need to invoke an Enduring Power of Attorney (EPOA). We have prepared a list of common questions and answers to help you understand the role of an enduring power of attorney for personal care and how and when to use it.
When a relationship ends, sorting out property can feel like a big task, but knowing the rules and timeframes can make the process much smoother. The Property (Relationships) Act 1976 (“the Act”) sets clear guidelines to help ensure fairness and certainty. There are two main ways to resolve relationship property matters: privately (by agreement) and through the Family Court. A private agreement often involves lawyers drafting a formal settlement agreement. Even when resolving matters privately, the principles of the Act still apply, and statutory entitlements and processes must be considered to ensure the agreement is legally valid and enforceable. If agreement cannot be reached, either party can apply to the Family Court for orders dividing property under the Act. The Court will apply the statutory principles, including a presumed equal sharing of relationship property unless certain exceptions apply. Understanding the time limits The time limit for applying for the Court’s assistance to divide your property and resolve your relationship property issues differs depending on the nature of your relationship. If you and your partner were in a qualifying de facto relationship, you have 3 years from the date of separation. If you and your partner were married, you have 12 months from the date of your divorce (also called a dissolution). These timeframes are designed to give both parties an opportunity to resolve matters without unnecessary delay. Acting within these limits helps avoid complications and keeps things moving forward. It’s important to note that the above timeframes apply to Court applications only. Parties are still free to reach their own arrangements (outside of Court) beyond these timeframes. What happens if you miss the deadline? If you do not apply to Court within the relevant timeframe, you may lose the right to have the Court determine your relationship property division. Section 33 of the Act allows the Court to grant leave (permission) to apply out of time, but only in limited circumstances. The Court will need to be satisfied that not granting leave would cause serious injustice. This can be a high threshold to meet, so it is much safer to act within the time limits.
Few people realise the importance of setting up Enduring Powers of Attorney. Enduring Powers of Attorney are essential for older people, however we recommend that people of all ages consider putting these valuable documents in place. After all, an accident and unexpected illnesses can occur at any time, and often happen when we least expect them. What is an enduring power of attorney? An Enduring Power of Attorney (“EPOA”) is a legal document whereby a person (the “donor”) appoints an agent (the “attorney”) and authorises them to do certain things on the donor’s behalf. There are two kinds of enduring power of attorney: property; and personal care and welfare. Having EPOAs in place gives you the peace of mind that the person or persons that you want to be managing your affairs if or when you lose capacity can do so without lengthy delays or court involvement. In the long run, these documents save you and your family a lot of money and ultimately a lot of unnecessary stress. When should I have an Enduring Power of Attorney document prepared? EPOAs are not just for the elderly. Over the years, we have acted for numerous clients in applying to the Court to be appointed welfare guardians or property managers for their young spouses, children and other relatives who have been in accidents or suddenly diagnosed with neurological disorders. People tend to think those things will never happen to them, or to their loved ones… but the truth is they can happen to anyone at any time. It is essential that Enduring Powers of Attorney (“EPOAs”) are set up before they are needed. Once a person has been declared mentally incapable, their family will only be able to act on their behalf if EPOAs are in place. If there are no EPOAs, the only option available to their family is to apply to the Court for an order to act on the person’s behalf under the Protection of Personal & Property Rights Act. This is an expensive and time-consuming process and can ultimately result in a non-family member being appointed. At Smith and Partners, we encourage all of our clients to have EPOAs prepared at the same time as they have Wills prepared. In fact, we think EPOAs are such an important aspect of Estate Planning that we offer these documents at a reduced price when they are prepared together with a Will. When does an Enduring Power of Attorney come into effect? When can they be used? EPOAs in relation to personal care and welfare can only be used when the donor has been declared “mentally incapable” – for example, if you enter the late stages of a neurological disorder such as dementia or Alzheimer’s, or if you suffer from a brain injury or coma. At this point, the EPOA will need to be activated or invoked. EPOAs in relation to property can either come into effect immediately once they are signed or only once the donor is declared mentally incapable, at which point they will need to be activated or invoked. The donor elects at what point the power of attorney is to come into effect at the time the EPOA is drafted. They are called “enduring” powers of attorney because the power granted by them endures through the donor’s mental incapacity. A common misconception is that they remain in effect after the donor’s death; this is not the case. When the donor dies, the EPOA is immediately revoked and the terms of the donor’s Will take effect. You can read more about how to activate or invoke an EPOA by clicking here . Why do I need an enduring power of attorney for property? An EPOA in relation to property enables the attorney to deal with the donor’s personal property, including their bank accounts, investments, and any share or interest they have in real estate. This type of document can prove to be extremely valuable when a person is not capable of managing their own property or financial affairs. Example: Jane and Bob are married and own a house in their personal names, jointly. Bob has been declared mentally incapable and has been placed in a rest home. Jane wants to sell the house and buy a small one-bedroom unit for herself and then use the equity to pay for Bob’s rest home fees. Even though Jane and Bob are married, and she wants to act in the best interest of both herself and Bob, she will not be able to sell the property UNLESS Bob has EPOAs in place. This is because Bob no longer has the required mental capacity to sign a sale and purchase agreement. Jane’s only option would be to apply to the Court to be appointed as Bob’s Property Manager. This is often a time consuming and stressful process, generally taking months and costing thousands of dollars in legal fees. If Bob had put a property EPOA in place appointing Jane while he still had mental capacity, Jane would be able to sign a sale and purchase agreement on his behalf once the EPOA had been activated. This would avoid any delays in selling their property, and would give Jane a clear path forward. What if I don’t want the power of attorney to continue after I have lost capacity? If you would like to give somebody a non-enduring power to act in relation to your financial affairs for a limited time, then a general (non-enduring) Power of Attorney and Deed of Delegation may be more appropriate. This type of appointment can be very helpful if you are likely to be physically absent when a document (such as a sale and purchase agreement or loan document) needs to be signed. Unlike the Enduring Power of Attorney, this power of appointment ends either at the end of the specified time frame or matter, or upon loss of mental capacity, as well as upon death. Why do I need an enduring power of attorney for personal care and welfare? Gone are the days when a person’s ‘next of kin’ can make decisions about their loved one’s personal care and welfare matters. Hospitals as well as the vast majority of rest homes now require a copy of a patient’s EPOA before any person can make decision on the donor’s behalf. Having an EPOA in place with respect to personal care and welfare allows your loved ones to make decisions on your behalf without any lengthy delays. Example: Jane now wants to move Bob from Rest Home A to Rest Home B because she feels that he is not getting adequate care at Rest Home A. Bob does not have the mental capacity to make this decision for himself. If Jane has not been appointed as Bob’s attorney in an EPOA, she cannot make this decision for him. Again, Jane’s only option is to apply to the Court to be appointed as Bob’s ‘Welfare Guardian’, costing thousands of dollars, and often causing long delays. Ensure that you and your family are protected by putting Enduring Powers of Attorney in place today.
