top of page

FAQs: Going Through, or Considering a Separation?

Updated: May 21

FAQs: Going Through, or Considering a Separation?

The first and most important thing to know when going through a separation/starting to separate your assets legally, is that we are here to help and provide guidance through this emotionally draining and often highly stressful time.

What is the Property Relationships Act 1976? The Property (Relationships) Act 1976 ("Act") is the legislation that deals with how property and assets are divided if a relationship ends (which includes when it ends by death of one of the parties). The Act presumes that each individual contributes equally to the relationship, regardless of the actual cash or physical contributions, and it aims to provide a division of the relationship property. The starting point is always for an equal division of assets, but there are some provisions that allow for adjustments to the general presumption of equal sharing.

When does the Act apply?

Generally, a relationship will need to have lasted for three years for the full provisions of the Act to apply. However, sometimes shorter relationship will also qualify e.g. if there is a child(ren) involved or one person has made a substantial contribution. If you do not want the Act to apply to you, you can enter into a Contracting Out Agreement (sometimes referred to as a pre-nuptial agreement or pre-nup) at any time during a relationship. A Contracting Out Agreement enables you to contract out of the Act by setting out your own agreement as to the status, ownership and division of property in the event of separation, including separation by death.

Relationship or separate property?

Property which you and your partner own is classified as either ‘relationship property’ or ‘separate property’.

Relationship property usually includes:

  • The family home and chattels (household furniture, vehicles, boats, pets etc);

  • Any property acquired by either person before the relationship, for the common use or benefit of both parties;

  • Any property owned jointly or in equal shares by the parties;

  • Property bought or acquired by either person during the relationship (expect for gifts and inheritances – noting below);

  • Gifts or inheritances that have been intermingled with other relationship property in certain circumstances (e.g. inheritance paid into a joint bank account and used to buy an appliance or holiday home);

  • Income earned during the relationship;

  • The value added during the relationship to superannuation, KiwiSaver and life insurance;

  • Increases in the value of the relationship property, income from it, or money from the sale of it;

  • Any other property which both parties agree is relationship property.

Separate property usually includes:

  • Gifts and inheritances, where they have been kept separate and not used during the relationship;

  • Family heirlooms or taonga, where they have been kept separate;

  • Property acquired under a trust, unless that trust is considered a nuptial trust;

  • Property acquired by either person prior to the relationship commencing and where that property has not been used for the benefit of both parties during the relationship;

  • Property acquired with the proceeds from the sale of separate property and not intended for the use or benefit of the relationship;

  • Increases in the value of the separate property (unless it is caused by the actions of the other party or by the use of relationship property).

Can separate property become relationship property?

Separate property may become relationship property if it gets mixed with relationship property, is used for relationship purposes, or if the direct or indirect actions of the other person contributes to an increase in the value of separate property. Indirect actions could include, for example, caring for children while a person works to increase the value of his/her separate property. The increase in value will not necessarily be shared equally – it may be apportioned according to the contribution each person made to the increase. Where separate property (e.g. a gift, trust money or inheritance) is used for the benefit of both parties or becomes intermingled with other relationship property, it may be classified as relationship property.

The family home and family chattels are always relationship property no matter whose name they are in or how they were acquired, unless there is a valid contracting out agreement in place. Where both parties owned homes before the relationship began and one became relationship property by being used as the family home, an adjustment in the division of property may be made to take account of the other home.

What about debts?

Debts are classified as either relationship debts or personal (separate) debts under the Act in the same way that property is either relationship or separate property. Personal debts are those incurred to acquire or improve separate property or those incurred before the relationship began or after it ended. Even though a debt may be in one person’s sole name (e.g. a credit card), that does not mean it is a personal debt – that depends on the purpose for which the debt was incurred. In some cases, a student loan may be classified as a relationship debt depending on what it was used for and some debts (e.g. bank overdraft) may be partly relationship and personal debt. The responsibility for relationship debts is shared but personal debts remain the responsibility of the person who incurred them. Some examples of relationship debts:

  • Those incurred jointly (e.g. hire purchase agreements or finance agreements for a family car);

  • Loans for a common enterprise (e.g. a business that benefits both parties);

  • Incurred to acquire, improve or maintain relationship property (e.g. mortgage, loan to renovate a house);

  • Credit card debt for usual day-to-day purchases (e.g. household items, groceries, family holidays);

  • Those incurred for the purpose of brining up a child of the relationship (e.g. school fees).

How does the process work?

When you separate the only way to ensure finality is to enter into a legally binding document provided for under the Act, often referred to as a ‘separation agreement’. A separation agreement sets out the agreement for the division of assets between the parties. For a separation agreement to be legally binding, both parties must engage independent lawyers for advice. The process of getting independent legal advice involves full disclosure between the parties, which then allows each lawyer to advise their respective client exactly what their entitlements are under the legislation. Other than matters of professional courtesy, we will not send anything to your ex-partner’s lawyer without you first reviewing and approving the content to be sent. Once legal advice has been provided, and the parties have agreed to the division of their assets, the separation agreement is drafted and signed, with the lawyers also certifying that they have advised their clients of their entitlements under the legislation. This is very different to having the document witnessed, and the full process must be undertaken by the lawyer before they can provide such certification. Without certification, an agreement is not binding.

What if one person will be left worse off than the other?

If there is significant economic disparity between the parties after separation, and that disparity is caused by the division of functions during the relationship, then the normal equal division of relationship property may be adjusted to compensate for the economic disadvantage. Division of functions refers to how people organise their lives e.g. one party may have stayed home to look after the children while the other worked, or one party supported the other to enable them to study and advance their career.

What if the parties cannot agree?

If you cannot agree on a division of relationship property, you can apply to the Family Court for a division of the relationship property. The Family Court can resolve the issues such as identifying the relationship property, determine values and make a decision as to how the relationship property will be divided. This will then be outlined by the Court in a Relationship Property Order. Generally, cases are settled prior to a full hearing, but the processes of the court can be helpful in getting the parties to reach agreement. It should be noted that the Court process is slow and expensive, so it is certainly in everyone’s best interests to resolve their issues quickly outside of the court process.

Need help?

We specialise in relationship property which enables us to assist you to navigate these stressful and challenging times and provide you with expert guidance and support. We have extensive commercial knowledge and understand structures, businesses, trusts, and tax, which enables us to quickly and easily identify the issues and work with you to resolve them.

This article is intended for informational purposes only and should not replace specific advice. For personalised advice on all relationship property issues please contact us.

This article was accurate at the time of publishing.

41 views0 comments


bottom of page