Property Relationships Act

Refer to Family Trusts  

Second marriages are very commonplace now (about 1 in 4 marriages in New Zealand ends in divorce) with large numbers of men re-marrying in their forties, fifties and sixties. 

The Property (Relationships) Amendment Act 2001 renames and amends the 1976 Matrimonial Property Act. The Act came into force on 01 February 2002.

The changes apply to married couples, to partners in existing de facto relationships and partners who in the future enter into de facto relationships.

The aim of the new Act is to reform the law relating to the property of married couples and of couples who live together in de facto relationships. The Act recognises the equal contribution of partners to a relationship and provides for a just division of relationship property between the partners when their relationship ends by separation or death, while taking account of the partners’ children’s interests.

The Act extends relationships to include de facto relationships defined as two people, (i.e. a man and a woman, a man and a man, or a woman and a woman) living together in a relationship in the nature of marriage although not married to each other.

The Main Provisions are:
Couples living together for three years or more will generally have the house they live in, furniture, and cars divided on a 50/50 basis, regardless of who paid for those assets.

Other assets will be divided according to contributions to the relationship.

Contributions include financial and non-financial contributions.

If the couple has been together for less than three years (this is called a ‘relationship of short duration’), the equal sharing of the family home and chattels may be set aside. The Court will have discretion to divide property on the basis of contribution, but only if:

1. The couple had a child; or
2. One of the partners has made a substantial contribution to the relationship.

If the Court decides it should make Orders for the division of property from a short-term de facto relationship, the division shall be determined by reference to the contribution of each to the partnership rather than to any particular asset in question, as is the case currently.

The duration of a marriage will include any immediate prior de facto relationship. Therefore, a two-year de facto relationship followed by a two-year marriage will not be a relationship of short duration.

The Act will provide greater powers to award compensation to a spouse affected by property which has been diverted into trusts or companies.

The Act gives the Court power to make Orders that one partner to the relationship has occupation of the home or flat, and use of the furniture, and the Court will be able to make Orders that certain property cannot be sold.

The Act gives the Court power to postpone vesting of property if there is undue hardship to children.

If one partner dies, the Court may order the same share of property (to which the other partner would have been entitled had the relationship ended by separation) to be awarded to the other partner – regardless of what the Will says.

De-facto property sharing will apply only to those over aged 18.

The courts can order payment to redress economic disparities (Section 15), in which case a partner can be awarded greater than 50%.

Contracting Out
You may ‘contract out’ of the above regime. If you or any members of your family are intending to, or do currently, live in a de facto relationship we strongly recommend that consideration be given to the protection of assets by entering into a Contract. It is our view that the formation of Trusts linked with Matrimonial and De Facto Property Agreements, which ‘contract out’ with regard to the assets placed in those Trusts, will provide protection for the assets covered.

This Act will have major implications on many couples. We urge you to seek professional, legal advice if you believe you could be affected. We are happy to recommend a lawyer if you do not already have one.

"Pre-Nuptial Agreement" - needs to be signed by both parties.  Agreements must be certified and witnessed by separate lawyers for each party to be binding.  Each lawyer must explain to a party the full implications and effect of the agreement.  Likely cost is around $500-$600 each.  The court now has greater power to set aside an agreement if it is very unfair under Section 21 J (1).

Click here to check out the benefits of assets protection through setting up a family trust. 

Common Misconceptions
Some of the more common misconceptions that we have come across are:

Q. "I have only lived with my partner for two years and the Act only applies to those who have lived with their partners for three years from 1 February 2001".
A. This is incorrect in looking at whether a relationship has met the three year threshold, periods before 1 February 2001 can be counted.  For married couples who were in a de facto relationship before they married, the period of their de facto relationship is treated as if it were part of the marriage.  Eve if you do not meet the three year threshold the Act may still apply if you have a child with your partner, or if your partner has a "substantial contribution" to the de facto relationship.

Q. We have been in a relationship for four years, but we do not live together.  The Act does not apply to us. 
A. The Act may very well apply to you.  The Act sets out a large number of factors for the courts to make their decision on.  Even if you do not physically live with your partner, you may still be caught by the Act.

Q. I have lived with my partner for five years - we're not married.  Both of us have previously been married to other partners and we each have children from our first marriages.  When I die my Will leaves everything to my children and that's how I want it.
A.  Under the new Act your partner has the right to claim against your estate.  Your partner will also be able to claim under the Family Protection Act 1955.  Additionally, if you are supporting any of your partners children, those children may also claim under the Family Protection Act. 

Q.  I lived with my partner for two years and we have been married for one year. I am about to inherit $200,000.  This is my money and if we separate it will not be counted as relationship property?
A.  The Act requires "relationship property" to be divided equally when a relationship breaks down.  Inheritances are usually treated as separate property and not counted in the relationship property, but if you mix them in with relationship property, part or all of the inheritance can become relationship property.

Disclosure Statement available on request and free of charge, phone 04 471 0662, or email alison@lyfords.co.nz

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