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Prenups: How do they work? The essential guide

6 March 2024
by Canterbury Legal

You’ve just entered a new relationship. Congratulations! But what if you and your partner come into the relationship with different assets that you both wish to keep, should you later decide to go your separate ways? This is where a Contracting Out Agreement, more commonly known as a “prenup”, comes into play.

In a nutshell, a prenup sets out who keeps what property if the partners in a relationship separate. 

In modern New Zealand law, you do not need to be married or in a civil union for you or your ex-partner’s property to be up for grabs upon separation. Rather, in a de facto relationship, you and your partner simply need to be living together as a couple for three years before the rule of equal sharing of relationship property kicks in.

This means that, if you do not have an agreement in place, the rule is that relationship assets (such as KiwiSaver, any inheritance during the relationship, or a distribution from a Trust) get divided equally between the partners when the relationship ends. You can read more about this on our Relationship Property page.

Importantly, this also applies to the family home, whenever this is acquired. So if one of the partners has put up all the equity for the house, then the other partner can get half of the equity, even if they haven’t made any contributions.

A prenup allows the parties to “contract out” of the relevant provisions of the Property (Relationships) Act 1974. A prenup allows you to create your own arrangements about what should happen to your property should the relationship end. You and your partner can decide:

  • What property is relationship property (which gets split 50:50), and what is separate property (which stays with one party upon separation)
  • In what proportions some or all of your property should be split (other than the default 50-50)
  • Who will get property that can't be divided (such as a family pet).

Prenuptial Agreements: They don't come from a lack of confidence!

Prenups don't come from a lack of confidence in a relationship. The people who enter them usually intend their relationship (or marriage, or civil union) to be for life, and believe it will be for life. And luckily, most of them are. Most prenups are never put to the test.

But sometimes, usually years on, things change, or the unexpected happens. And when that happens, a prenup can be a real relief - not because you might end up with more assets than you would otherwise, but because it's removed the prospect of uncertainty, conflict or drawn-out legal action.

Why should you consider getting a prenup?

One word, certainty.

Prenups aren't just for situations where one partner has significantly more assets than the other. They provide you certainty about your assets, and they give you the opportunity to consciously decide how you want to share your property with your partner. It's you and your partner deciding - not just leaving it up to legislation made by people who don't know your relationship.

Both you and your partner are on the same page about your property. You know what you have. And it's a demonstration of respect for what each of you have earned.

Children from previous relationships

Coming into a relationship, you might have other people you have to look out for, such as children from a previous relationship.

The existence of those children doesn't change the default position at law. Any relationship property will still be divided 50:50 between you and your partner if you split. That could also include assets you might want to give to your children. That's not necessarily fair on those children, and it might also make it harder for you to care for them. A prenup can help make sure assets and property are kept safe for them.

Dealing with property that might not be split easily

Not all property can be split evenly down the middle. With the family home, one partner usually buys out the other’s share of the home upon separation.

A prenup can include provisions for sharing the equity between the partners, to recognise their different contributions to the family home. It can also contain a process for one partner buying out the other partner at an agreed upon price, and whether the family home is to be sold on the open market. All of this reduces uncertainty in the case of the partners going their separate ways.

Reducing conflict if your relationship does end

The more things you agree on early in your partnership, the less you'll have to deal with if things turn rocky. That makes for an easier and less stressful time for everyone involved.

Learning more about each other and getting any anxieties out of the way

You're planning to spend the rest of your lives together. It's important that you can be open and transparent with each other about all your thoughts going into that. Any anxieties you might have at an early stage are only going to grow over time, and the chances are that your partner will have similar worries too. It can be a good idea to get them out in the open.

So talking about a prenup might make it less likely that you'll ever actually have to use it.

Image of two people holding warm drinks on a table

How to bring up a prenup

Although it isn’t always easy to bring up the prospect of getting a prenup, it's good to talk about it in the context of broader financial discussions, such as retirement and estate planning. A prenup is just another part of that wider planning.

And remember: It's something you might both be thinking about, but just waiting for the other to bring up. So don't stress!

Call on us for advice and help

Our relationship property experts are here to help you through all stages of your discussions. They can guide you through prenups, division of relationship property, care arrangements for children, and anything else you might need—all with sensitivity and with the benefit of experience.

Get in touch with our team for a no-pressure chat

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