avatarWendy Scott

Summary

The article discusses the implications of New Zealand's Relationship (Property) Act on de facto relationships, emphasizing the importance of protecting assets through legal agreements.

Abstract

The article provides insight into New Zealand's Relationship (Property) Act and its impact on de facto relationships. It highlights the legal entitlement of de facto partners to claim half of their partner's assets after three years of cohabitation, regardless of marriage status. The author shares personal experiences and legal advice on contracting out of the Act to safeguard individual assets, especially in second relationships where accumulated wealth and inheritance for children are concerns. The article also clarifies what constitutes a de facto relationship under New Zealand law, which may not necessarily involve living together, and outlines factors that determine such a partnership. The author encourages readers to seek legal advice to understand their rights and to protect their assets.

Opinions

  • The author believes it is prudent to contract out of the Relationship Property Act to protect assets, especially considering potential future scenarios such as dementia, influence from external parties, or death.
  • There is a perception that the law may not align with common sense, and people may unknowingly find themselves in a de facto relationship with significant financial implications.
  • The author suggests that even if trust is present in a relationship, legal precautions are advisable to prevent potential disputes over assets.
  • The article conveys that the definition of a de facto relationship in New Zealand law is broader than the common understanding and can encompass various living arrangements and financial interactions.
  • The author emphasizes the importance of legal advice to navigate the complexities of relationship property laws, particularly for those who may not clearly understand when they are in a de facto relationship.

Relationships | Divorce | De facto relationships | Property

Protect Your Assets From New Partners

Are you in a de facto relationship without knowing it?

Photo by Kat J on Unsplash

Roughly one-third of relationships end in separation or divorce. Although we all hope that won’t happen to us, statistically, it will happen to some of us.

Do you know what will happen to your property and other assets if you split up from your partner? Have you protected your financial stability? What will happen to your children’s inheritance?

In New Zealand, there is something called The Relationship (Property) Act. This means if you are over eighteen and have been with your de facto partner for three years, they are entitled to half of your assets. House, car, pension, cash, it’s all up for grabs.

If you are married, in a civil union partnership, or a de facto relationship, even if you are a same-sex couple, and your relationship ends by separation or because one of you dies, you will be affected by the Property (Relationships) Act (the PRA). — The Law Society

If you and your partner had nothing when you met, a 50/50 split might be fair. That is what happened when I separated from my ex-husband. Even so, I had to move out of my house. I vowed I would never be in the position of being forced to move out of my home again.

As well as the house, we also had to divvy up pensions, bank accounts, vehicles, and furniture. We agreed to separate in April, and I moved out in September. My lawyer told me that this was extremely fast in comparison with a lot of other couples.

I’m in my fifties now and met my new partner a few years ago. The second time around is different in many ways, especially in terms of finances. Most people, but not all, have accumulated property and other assets when they meet their second partner. And most people want that property and assets to go to their kids when they die.

No-one I’ve ever met envisions splitting up with their new partner and losing half of their net worth. But this is what might happen under New Zealand law if you don’t protect your assets.

Disclaimer: I’m not a lawyer, and I am not qualified to or intending to give out legal advice. I’m sharing what I discovered when I researched my own situation. You must speak to your lawyer for advice about your situation.

Contracting out of the Relationship Property Act

When I met my partner, I made it very clear that my assets would stay mine, and he was welcome to keep his.

In NZ, we can opt-out of the Relationship Property Act if we want to. This means the fifty percent/three-year rule for de facto partners no longer applies.

But should you bother? How likely is it that your partner will dump you and claim half your assets?

Only you can decide.

Even if you trust your partner, consider these situations:

  • Your partner may get dementia and act out of character if you split up
  • Your partner’s kids, friends, family, or new partner may persuade them they have ‘earned’ half of your assets if you split up
  • Your partner may die, and their kids or their kid’s partners may decide half of your assets is their inheritance

My financial advisor and my lawyer were adamant that I should contract out of the Relationship Property Agreement.

Was I over cautious? Although some people thought I was scare-mongered into spending money with my lawyer, I think I did the right thing.

What constitutes a defacto relationship?

So what is a de facto relationship? How do you know if you are in one?

I always thought that a de facto partner was someone you lived with. I was shocked to find that under NZ law, this is not necessarily the case.

If you are ‘living together as a couple under the law,’ and have been for three years, you are in a de facto partnership.

When I discussed this with my lawyer, my partner and I had been dating for eight months. She said that we were already in a de facto relationship.

We weren’t living together but stayed over at each other’s houses. I looked after my partner’s dogs when he went away. I introduced him to my friends, family, and workmates as my boyfriend, and we went out as a couple. That was enough to be in a de facto relationship.

‘Living together as a couple,’ is different from actually living together and is assessed on:

  • The length of the relationship
  • The extent to which you shared a home — you don’t have to live together, the number of nights you slept at each other’s homes counts.
  • The degree to which you merged your finances. Whether money was shared or used to support one another or if you were financially independent of one another. For example, did you have a joint bank account?
  • How your property was owned and used.
  • Whether you had a sexual relationship, though, it does not need to be exclusive. You can also be in a de facto relationship and not have a sexual relationship.
  • How you cared for and supported any children either of you had. This also applies to other children of the family, such as nieces and nephews.
  • Your mutual commitment to a shared life. This takes into account your domestic arrangements, such as who does what chores around the house.
  • Whether you bought assets together, such as a house, furniture, cars
  • Whether you hold yourself out as a couple, what is your Facebook status? How do your friends and family view you?

Not all of these factors need to be met for you to be in a de facto relationship.

The above list was mainly from The Law Society plus a few supplemental points from a couple of NZ lawyers websites (Tompkins Wake, Apiringlaw).

This is my interpretation, and only your lawyer can advise if you are in a defacto relationship.

Photo by Cytonn Photography on Unsplash

Other complications

Sometimes whether you are in a de facto relationship is not clear.

What happens if you are flatmates and then start going out? Or if you believe you have a lodger, but the lodger thinks you are in a de facto relationship?

How are on-and-off-again relationships affected? Or living separately, then together, then separately. I know a few people prefer to live apart but still have a relationship. This is called living apart together.

Also, the three-year rule isn’t hard and fast if there is a child in the relationship. And it doesn’t have to be the child of the two people in the relationship. It could be a child of one partner or even a stepchild of one partner, as long as they live as part of the family with the adults.

If you are not sure if you are in a de facto relationship, talk to your lawyer.

What you could lose

If you are over eighteen, in a de facto relationship for over three years and it ends. In that case, everything could be up for grabs, including:

  • Property
  • Savings
  • Investments
  • Pensions
  • Cars/boats/other vehicles

Final thoughts

My partner and I opted-out of The Relationship Property Act. Now, what is mine stays mine, and what is my partner’s, remains his.

If you are unsure whether you are in a de facto relationship and what would happen to your assets should you split up from your partner, go and see your lawyer.

My lawyer had to go into a lot of detail around my finances and my relationship to ensure that the contracting out document contained the correct information. My partner had to do the same with his lawyer. The details will be revised once my partner and I buy a property together.

I realize that most of the readers on Medium do not reside in New Zealand; however, it might pay to determine what the law is in your own country. It may not be what you think it is. And the law may not align with common sense.

Disclaimer: I am not a lawyer. This is not legal advice, and I am not qualified to give legal advice. For proper legal advice about your situation, you must go to a lawyer.

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